Cabinet nod to fast-track Govt stake sale in PSUs

 

Source :BL Bureau:May27,2010

New Delhi, May 26 The Cabinet Committee on Economic Affairs (CCEA) today gave its nod for a vital change in the process of share sale in state-run firms. Merchant banker appointments for Government stake sale will now be advanced to an earlier stage in the disinvestment process, thereby saving time, which could be optimally utilised in preparing for the actual transaction.

"The appointment of merchant bankers and other intermediaries will now be taken up simultaneously with the process of seeking CCEA approval as soon as the Minister-incharge has approved the case," said an official release issued here after the CCEA meeting. The approved process will help planning and timing of the public offerings in a manner that they are spread out evenly.

This would also avoid bunching as far as possible so as to ensure better response from investors, including retail. RETAIL INTEREST Retail investors' have shown muted interest in the recent Government stake sale transactions, partly due to some stiff pricing. There was lacklustre retail response to NTPC, REC and NMDC issues last fiscal. The Department of Disinvestment has however maintained that the transactions have not been stiffly priced for the retail investors and that something was left on the table for such investors.

The Government's disinvestment strategy has undergone many shifts and turns over the last two decades. The UPA Government has now made it mandatory for all profitable listed public sector entities to have minimum 10 per cent public shareholding. Also, all profitable public sector companies need to be listed. For 2010-11, the Government has set a disinvestment target of Rs 40,000 crore.

The Centre's disinvestment mop up so far in the current fiscal stood at Rs 1,080 crore. In 2009-10, the disinvestment receipts stood at Rs 23,550 crore. Merchant Banking community has been showing keen interest in getting mandates for divestment transactions, with some of them even offering to take up assignments without charging any fees.

The department of disinvestment has also recently modified the criteria for appointment of merchant bankers for Government stake sale, with more weightage being given on technical parameters. There has been only one divestment transaction so far in the current fiscal - Satluj Jal Vidyut Nigam Ltd. There are indications that the Engineers India Ltd (EIL) divestment transaction could be the next. The CCEA had in January this year given its nod for divestment of 10 per cent Government stake in EIL through a follow-on-offering in the domestic market. krsrivats@thehindu.co.in