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The government plans to offer discounts and a quota of up to 20 per cent to retail investors while divesting stake in public sector enterprises through the offer-for-sale (OFS) route.
Of the government’s planned stake sales, disinvestment in Steel Authority of India Ltd (SAIL) might be the first. It is expected the Centre will sell five per cent stake in the state-owned company this month.
“The government intends to reserve more than 10 per cent for retail investors,” said a finance ministry official, adding the quota would depend on the size of the issue and would be decided on a case-to-case basis. “If it is a big issue and retail is not taken up, it sends a wrong signal.”
Currently, 35 per cent in follow-on issues is reserved for retail investors, but there is no reservation for retail investors in the OFS route. Last month, the Securities & Exchange Board of India (Sebi) had modified the guidelines on OFS, mandating at least 10 per cent of the total issue size for retail investors bidding for up to Rs 2 lakh.
The ministry official said in line with past government issues, retail investors could look forward to discounts in forthcoming issues, too.
“For SAIL, road shows have already been completed. It might be the first to hit the markets this month…Oil & Natural Gas Corporation (ONGC), Coal India Ltd (CIL) and National Hydroelectric Power Corporation might take another month, after the approval of the Cabinet,” the official said.
The government is also planning initial public offerings, such as those for Hindustan Aeronautics Ltd and Rashtriya Ispat Nigam Ltd.
If the government successfully manages to take ONGC and CIL to the market, these will be the biggest issues. However, ONGC has seen concern over gas price, while the CIL workers’ union has resisted stake sale in the entity.
Sale of residual stake in Hindustan Zinc and Specified Undertaking of Unit Trust of India, will fetch the exchequer Rs 15,000 crore and Rs 6,500 crore, respectively.
According to Sebi’s revised OFS guidelines, the seller (in this case, the government) will have to announce the intention of sale of shares two days before the OFS. The floor price will have to be declared a day before the issue. At a meeting between brokers and finance ministry officials on Tuesday, traders said a two-day notice might not be enough for retail investors.
“We are sincerely trying to reach out to retail investors. We are bound by the norms laid down by the market regulator. We will address these issues in the time to come,” said the official quoted earlier.
The government has been using the OFS route for disinvestment in public sector undertakings, as this is a more convenient way to raise funds from the market. Currently, under the OFS route, at least 25 per cent of the shares offered are reserved for mutual funds and insurance companies.
