In a big boost to retail investors, the Centre will reserve 10 per cent of the shares sold through the auction route of public sector firms for them along with discounts on the offer price.
The move comes in the wake of market regulator Sebi’s decision last month calling for a 10 per cent reservation of the issue size in offer for sale (OFS) for retail investors. This will bring the auction route on the same footing as initial public offers and follow-on public offers where 10 per cent of the shares are reserved for the retail category.
“There is a lot for retail investors interested in PSU disinvestment. Sebi has brought a separate bucket for retail investors in OFS and we will be using that option,” said a senior finance ministry official.
The reservation will be available only for retail investors who bid for amounts less than Rs 2 lakh. The plan comes at a time when the Centre is gearing up for big-ticket stake sales through the auction route including 5 per cent stake sales in ONGC Ltd and SAIL Ltd as well as the residual stake sale in Hindustan Zinc Ltd.
Introduced in 2012, private sector companies as well as the government prefers to use the OFS route for equity sales as it is simpler and can be done in a shorter time frame. But these have seen little participation from retail investors. In the PSU OFS, the highest participation by retail investors was a mere 5.81 per cent in the case of MMTC Ltd.
The finance ministry is also reviewing the quantum of discount offered to such investors and it will be available to even those participating in OFS transactions.
“We will continue the discounts for retail investors. While we will try to increase the quantum of discount, it will have to be reviewed on a case-to-case basis,” said the official. Till now, the government has been offering a 5 per cent discount to retail investors on the offer price in book-building offers.
Pointing out that retail investors are looking for good investment alternatives to fixed deposits and gold, Prithvi Haldea, chairman and managing director, Prime Database said, “Retail investors should be given a 15 per cent discount on the offer price. It will be a good incentive to help them enter the equity markets, which in turn will help expand and deepen the markets.”
Govt floats RFP for ONGC issue
Kicking off its disinvestment programme for the fiscal, the Centre is gearing up for a big bang stake sale in state-run ONGC.
To this effect, the department of disinvestment has invited bids from merchant bankers for managing a five per cent stake sale in the state-run oil explorer that could raise over Rs 17,000 crore.
“The government will select and appoint up to five merchant banker(s) with requisite experience in public offerings, who together will form a team..,” said the request for proposal (RFP).
The Centre currently holds 68.94 per cent stake in ONGC. The proposed disinvestment will be carried out through the offer for sale route. The department of disinvestment has floated a note for the Union Cabinet and it is expected to be taken up in early August.