Disinvestment ball starts rolling: 15 companies shortlisted.
Work on disinvesting government holdings may gather pace after the first week of August. Administrative ministries of around 15 Public Sector Undertakings (PSUs) have been asked to give feedback on the feasibility of coming out with initial public offers (IPOs) by then.
Official sources added that the government would be going in for a phased programme of increasing the public float of listed government companies to 10 per cent through either offloading its equity or through follow-on issues. The follow-on issue would take place only if a PSU was in need of fresh equity.
The 15 companies include listed firms like MMTC, in which the public float is less than 10 per cent, and other candidates like State Trading Corporation, Bharat Sanchar Nigam, Coal India Ltd, Engineers India Ltd, National Mineral Development Corporation (NMDC), Hindustan Copper, Manganese Ore India Ltd (MOIL) and Kudremukh Iron Ore Corporation Ltd (KIOCL).
The Ministry of Steel has already conveyed its willingness to disinvest in NMDC and MOIL, though it is in favour of a takeover of KIOCL by NMDC, which is a major player in iron ore mining. 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.
Response to IPO of Oil India Ltd (OIL) and NHPC Ltd is crucial to the outcome of the disinvestment exercise.
“There are fears that the NHPC issue that opens on August 7 may come under shadow of the Adani Power issue which opens on July 28 and closes on July 31. Investors will not be able to make money on the Adani issue by selling shares by the time NHPC comes to market,” said an official. At a price band of Rs 90-100, the Adani issue is expected to raise about Rs 3,000 crore if it is fully subscribed.
The NHPC and OIL issues will also give the government an idea of market appetite. The Budget had estimated divestment proceeds to be Rs 1,120 crore for 2009-10, though officials indicated the figure could be much higher.
IPOs of railway PSUs Rites and Ircon have been postponed, since these companies said they did not need additional funds, said an official. Similarly, power sector major NTPC Ltd had earlier conveyed its unwillingness to go for a follow-on issue. Besides, public float in the company is more than 10 per cent.
On the proceeds of OIL and NHPC issues, sources said they would flow into the National Investment Fund (NIF), since the Cabinet is not likely to take a decision on the fate of NIF by the time proceeds from the two offers come.
The government has three options with it as far as NIF is concerned. One, keep it intact with an amendment to allow money on it to be spent on infrastructure, besides the existing provision of social sector spending and rebuilding PSUs. Two, it could be disbanded and the disinvestment funds either flow into the Consolidated Fund of India or, three, keep the proceeds in a separate account.
All disinvestment proceeds mandatorily go into NIF that became operational in October 2007. Seventy five per cent of NIF’s annual income is to be used to finance selected social sector schemes, which promote education, health and employment.
The residual 25 per cent is required to be used to meet the capital investment requirements of profitable and revivable central PSUs that yield adequate returns, to enlarge their capital base to finance expansion/diversification.
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