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To woo foreign investors to participate in the disinvestment of Steel Authority of India Ltd (SAIL), in which the government is set to offload five per cent equity, road shows abroad are likely to begin this month. According to officials in the know, the stake sale is sure to be showcased in Singapore and Hong Kong, while other places are being identified.
On Friday, the SAIL shares declined 6.06 per cent on BSE to close at Rs 82.15 apiece. At this price, the government could raise about Rs 1,700 crore from the stake sale. The Cabinet has already approved divestment of equity in SAIL.
In Budget 2014-15, the government has set a target of raising Rs 63,425 crore through sale of its stake in companies - Rs 15,000 crore of that through divestment of its residual stake in non-government entities Hindustan Zinc Ltd (HZL) and Bharat Aluminum Company (Balco). Among public-sector undertakings, the government also plans to offload a 10 per cent stake in Coal India Ltd (CIL) and a five per cent stake in Oil and Natural Gas Corporation (ONGC). The bulk of the targeted disinvestment proceeds is expected to come from these two stake sales.
The CIL shares fell 2.34 per cent on BSE on Friday to Rs 362.45 apiece. At this price, this stake sale could alone fetch the government over Rs 22,000 crore.
For dilution of a five per cent government stake in ONGC, a Cabinet note has already been floated. This sale could bring Rs 17,000 crore at the current price of Rs 395.95 a share (down two per cent on BSE on Friday). So, the CIL and ONGC disinvestments are expected to fetch a combined Rs 39,000 crore to the government kitty at current prices. However, market prices at the time of stake sale could differ from the current rates.
"Most of the receipts projected for disinvestment will come from CIL and ONGC," an official said. However, CIL disinvestment by the previous government had met with strong opposition from the unions.
"CIL is important to meet the disinvestment target. The government has to take the bull by its horns. It will have to reasonably explain to the unions that the government will still retain management control," said Arvind Mahajan, partner & head of infrastructure and government services, KPMG in India. Even after disinvestment, the government will hold close to 80 per cent in the company.
However, no exact timeframe had been set for the stake sale in these two companies, officials added.
Mahajan believed the disinvestment target of Rs 63,450 crore was achievable, but the government had to quickly decide on stake sale so that it could take the advantage of the current bull run in stock markets.
The interim Budget for 2014-15 had estimated a receipt of Rs 36,925 crore from disinvestment and of Rs 15,000 crore from residual stake sale in the two Vedanta group-owned companies, HZL and Balco. The Union Budget seems to have added to the target another Rs 6,500 crore expected proceeds from sale of the Specified Undertaking of the Unit Trust of India (Suuti) stake in private companies.
Besides, the government is likely to include NHPC, Rashtriya Ispat Nigam Ltd (RINL) and MOIL in its disinvestment process. The government equity might also be diluted in two other power companies, which were being identified, officials said.
SAIL, NHPC, MOIL and CIL will also help the government meet the Securities and Exchange Board of India (Sebi) requirement of having a 25 per cent minimum public shareholding within three years. There could also be some other companies where the government might dilute its holding this year, as there are more than 30 companies where it is required to bring its stake down to 75 per cent over three years.
"We have not identified them, but some companies may see stake sale this year itself," an official said.
Most of the disinvestment, particularly to meet Sebi requirement, will be through the offer-for-sale (OFS) route. For this purpose, the government is awaiting the Sebi circular to get a clarity on pricing of shares for retail investors. The Sebi board had approved reserving a minimum of 10 per cent of the issue size in an OFS for retail investors (those bidding for less than Rs 2 lakh worth of shares).
Last year, the government could raise only Rs 25,841 crore, against the original plan of Rs 55,814 crore. A year before that, the actual mop-up was Rs 25,890 crore, compared with the Budget estimate of Rs 30,000 crore.
