As expected, the government is busy bending its own rules even as the August 9 deadline for the minimum public shareholding (MPS) norms is fast approaching. In a Sunday release, the government said the market regulator had agreed to consider a proposal where a state government entity will buy the excess 3.56 per cent government stake.
Let us see how this breaks the spirit of the law. The idea to mandate MPS was to ensure sufficient float in the market so that manipulation becomes difficult. MMTC, which eventually got sold at Rs 61 a share, was getting traded at over Rs 42,400 a share in 2007, largely due to its low float. Second, if there is wider participation in a stock, the hope is this will lead to better governance, as independent institutions will ask difficult questions to the management and help them realise mistakes, if any. The public outcries by UK-based hedge fund TCI and whatever few changes that have followed in coal sector are testimonies to this theory.
But, by placing the shares with a state government puppet, both these objectives are defeated. The idea is that the buyer will hold these shares perpetually, as the labour unions do not want these sold as they, for some weird reason, think selling 3.56 per cent will trigger a series of sales that will take the company to private hands. Second, one does not expect any state government entity raising dirty questions about the management of the company, except of course, if it were to earn some political brownie points.
Or, all these some small cogs in a game of political one-upmanship between the chief minister's party and the finance minister's in a crucial swing state on the eve of general elections?
What if Gillette India's labour union protests its 'publicisation' and demands that the excess shares are bought by one of the promoter's own subsidiary?
While the government seeks and gets away with all kinds of relaxations, these circus maneuvers would not be necessary in the first place if it is not rigid when it comes to rules it wants others to follow.
The department of disinvestment has put up request for proposals for selling shares in other MPS-non compliant PSUs. STC, for example, has to sell 613,000 shares.
At the current market price, this sale would fetch a little over Rs 6 crore. If the government follows the practice of steep discount, this amount could even halve. But, do you know what should be the track record of the merchant banker applying to sell the issue? The banker should have managed a Rs 500 crore issue, either Initial public offer or offer for sale, it should have research capabilities, it should give post-offer market support, blah blah. Deadline is July 11. The Street is afraid that Sebi now has to look out for relief in cases where a promoter sought to appoint banker to reduce stake but no one turned up.
Let us see how this breaks the spirit of the law. The idea to mandate MPS was to ensure sufficient float in the market so that manipulation becomes difficult. MMTC, which eventually got sold at Rs 61 a share, was getting traded at over Rs 42,400 a share in 2007, largely due to its low float. Second, if there is wider participation in a stock, the hope is this will lead to better governance, as independent institutions will ask difficult questions to the management and help them realise mistakes, if any. The public outcries by UK-based hedge fund TCI and whatever few changes that have followed in coal sector are testimonies to this theory.
But, by placing the shares with a state government puppet, both these objectives are defeated. The idea is that the buyer will hold these shares perpetually, as the labour unions do not want these sold as they, for some weird reason, think selling 3.56 per cent will trigger a series of sales that will take the company to private hands. Second, one does not expect any state government entity raising dirty questions about the management of the company, except of course, if it were to earn some political brownie points.
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Why is Sebi agreeing to this breaking of spirit of the law, which it fiercely defended elsewhere? Just because some labour union is protesting? Is NLC's labour union more powerful than Coal India, which is already down to 90 per cent? Are NLC's labour leaders so unreasonable that they don't understand the difference between divestment and privatisation?
Or, all these some small cogs in a game of political one-upmanship between the chief minister's party and the finance minister's in a crucial swing state on the eve of general elections?
What if Gillette India's labour union protests its 'publicisation' and demands that the excess shares are bought by one of the promoter's own subsidiary?
While the government seeks and gets away with all kinds of relaxations, these circus maneuvers would not be necessary in the first place if it is not rigid when it comes to rules it wants others to follow.
The department of disinvestment has put up request for proposals for selling shares in other MPS-non compliant PSUs. STC, for example, has to sell 613,000 shares.
At the current market price, this sale would fetch a little over Rs 6 crore. If the government follows the practice of steep discount, this amount could even halve. But, do you know what should be the track record of the merchant banker applying to sell the issue? The banker should have managed a Rs 500 crore issue, either Initial public offer or offer for sale, it should have research capabilities, it should give post-offer market support, blah blah. Deadline is July 11. The Street is afraid that Sebi now has to look out for relief in cases where a promoter sought to appoint banker to reduce stake but no one turned up.