NEW DELHI: The halted PSU sell-off programme is set to resume. The Cabinet Committee on Economic Affairs (CCEA) is likely to take up a clutch of disinvestment proposals on Thursday, including follow-on offers (FPOs) of Steel Authority of India (SAIL), Hindustan Copper, Nalco and Neyveli Lignite Corporation, official sources told FE.
While the timing of these offers will depend on market conditions, the government’s move to clear the decks right at the start of the fiscal signals its intent to fast-track the disinvestment process, which faced hurdles in the past year.
The budget target is to mobilise R30,000 crore from PSU disinvestment in the current fiscal.
Steel major Rashtriya Ispat Nigam’s initial public offering (IPO), which was cleared by the Cabinet earlier, would be the first offer to hit the market this fiscal. The other offers could follow RINL’s IPO, which is expected to fetch some R2,500 crore.
Unfazed by the fiasco of ONGC auction last March, when it had to seek the help of Life Insurance Corporation to salvage the offer, the government might still opt for the auction route in some of these cases if the regulatory approvals are obtained.
A senior disinvestment official requesting anonymity said that the auction process would save time and cost. The government reckons that a combination of auction and the conventional IPO/FPO route might be the practical way. “If a company is eligible for auction, then we would rather go for auction than the prospectus-based stake sale,” the official said.
Analysts, however, remained sceptical of the feasibility of these stake sales at this juncture. Jagannathan Thunuguntla, equity research head at SMC Global said: “the current market conditions will make it very difficult for the government to find a good response to its disinvestment programme. The market sentiment has to be upbeat and the pricing has to be right for disinvestment to fetch good money (for the government).”
Another expert, who wished not to be named, said that cabinet approval is more of an administrative procedure which doesn’t mean that offers will hit the market in the first quarter of the fiscal. The government, in all likelihood, will wait for investor sentiment to revive before pushing these offers, he opined.
Another government official also said the cabinet approval won’t specify the route for stake sale. There is a feeling in the government that the auction or institutional private placement routes might be preferred by some PSUs in the disinvestment pipeline.
After a long delay due to volatile markets, the SAIL FPO has been reworked to include only the sale of 10% government stake as the company’s board has decided not to raise any fresh capital. The government holds a 85.82% in the maharatna company at present.
Similarly, in the case of Hindustan Cooper where it holds 99.5%, the government is planning to go for 10% stake dilution only as the company does not require any funds through issue of fresh equity.
The Cabinet had in 2011-12 approved HCL stake sale which included issue of fresh equity as well, but the plan did not go through.
The disinvestment department is not averse to using the auction route for Hindustan Copper. During 2011-12, the government could raised only about R14,000 crore as against the target of R40,000 crore.
