Listed companies with less than 10% public float also on agenda
The United Progressive Alliance (UPA) government today announced a bold disinvestment policy that could see unlisted companies with a positive net worth going to the stock market and the proceeds from sale of government equity being used entirely for social sector programmes for a three-year period.
The government’s announcement sparked a spurt of buying towards the fag end of trading, pushing the benchmark Sensex up more than 150 points to regain 16,000-levels after three days. After a roller-coaster ride, which saw the Sensex swinging over 500 points, the 30-share index finally closed the day at 16,063.90, netting a rise of 151.77 points or 0.95 per cent over its previous close.
Today’s decision, which was announced by Home Minister P Chidambaram after a meeting of the Cabinet Committee on Economic Affairs, opens the doors for around 50 companies to get listed, prominent among them being Bharat Sanchar Nigam Ltd, RITES Ltd and Ircon. Unlisted companies qualifying for IPOs should have a positive net worth and be making profits for three years.
| LISTING TOWARDS THE MARKETS (PAT of some key unlisted PSUs) | |||
| Company | 2006-07 | 2007-08 | 2008-09 |
| BSNL | 7,805 | 3,009 | 575 |
| MOIL | 134 | 480 | 664 |
| Mazagaon Docks | 168 | 241 | 270 |
| IRCON | 75 | 114 | 140 |
| RITES | 118 | 104 | 94 |
| (In Rs crore) | |||
Besides, listed government companies that are profitable and have less than 10 per cent floating equity will also be going to the market.
Though, 18 government companies are listed and do not comply with the mandatory 10 per cent norm, about 10 such companies are profitable and will need to come out with a follow on issue. These include MMTC Ltd and National Mineral Development Corporation. The government will need to disinvest 8.3 per cent in NMDC and 9.3 per cent in MMTC to increase the public float to 10 per cent.
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Disinvestment proceeds from the sale of government equity during April 2009 to March 2012 will be used to meet capital expenditure for specific social sector schemes.
The money from disinvestment will go into the National Investment Fund (NIF) created in 2005. But in a departure from the earlier policy of building a corpus and spending only NIF’s income on social sector programmes, the entire proceeds will be invested in such schemes, a senior finance ministry official said. Chidambaram added the NIF’s original investment policy would be restored from April 2012.
The official said the CCEA approval spelt out a generic approach and laid down the disinvestment strategy and programme. “The government will not push the companies to come out with public issues. The departments of disinvestment and public enterprises will chalk out the list of companies in consultation with the companies and the administrative ministry. Individual cases will need to go back to the Cabinet,” he added.
The UPA government in its second tenure has already approved disinvestment in five companies, all in the energy sector.