NEW DELHI: The government plans to kick off the disinvestment programme in 2012-13 with a Rashtriya Ispat Nigam (RINL) initial public offering (IPO) in June.
A senior Department of Disinvestment (DoD) official told Business Standard the groundwork for the IPO of the government’s 10 per cent paid up equity in RINL was already underway and the issue was expected in June. “We should be able to file the prospectus with the Securities and Exchange Board of India (SEBI) in the first fortnight of May,” he said, adding the idea was to bring out at least one issue in June.
In January, the government had approved the sale of 10 per cent of its stake in RINL through an IPO. The IPO was earlier scheduled for the last quarter of 2011-12, but had to be postponed due to sluggish market conditions.
The issue is expected to fetch about Rs 2500 crore to the exchequer. DOD and steel ministry officials, however, said price calculations were yet to be carried out and declined to project an estimate.
The company has already initiated the IPO process and has appointed book running lead managers for this.
Apart from RINL, other companies lined up for disinvestment in 2012-13 include Hindustan Copper, Steel Authority of India, Bharat Heavy Electricals and Oil India.
The official said considering the current market situation, IPOs would be preferred over follow-on public offerings (FPOS). The government also plans to utilize the auction route for a few companies. The route was questioned after a stake sale through this mode was carried out for ONGC in March. The official, however, said there was no problem with the method, and considering it took considerably less time compared to IPOs or FPOs, the auction route was easier. An empowered group of ministers has already discussed stake sales in OilIndia and BHEL through auctions.
Notifications for central public sector enterprises to opt for buybacks and purchase government stake in other public sector companies have also been issued.
The government had scaled down its disinvestment target for 2012-13 to Rs 30,000 crore, against Rs 40,000 crore in the two previous financial years, owing to repeated failures in garnering the projected amount.
Though the DoD is looking at routes other than the traditional market one to boost stake sale, persistent bearish market sentiment and SEBI’s directive to companies to raise public shareholding to 25 per cent in a year are expected to exert further pressure on the process.
An estimated Rs 39,000 crore worth of shares would be brought to the market if both private and public sector companies, which are required to meet SEBI norms, do so this year.
The DoD official said though the disinvestment target of Rs 30,000 crore was important, the more significant issue was the price, adding stake sale would be carried out only in companies in which the government would get the right price.