Market regulator Sebi’s diktat asking all public sector companies (PSUs) to adhere to the minimum public shareholding norms of 25% within three years could lead to stake sales in 36 firms that do not currently meet this requirement, enabling the government to garner more than R60,000 crore via stake dilution.
Currently, there are 36 PSUs in which the government holding stands at over 75%. An analysis of Capitaline data shows the government could end up raising more than R60,000 crore by suggested mandatory stake sale in these companies based on Thursday’s closing price.
Top 10 PSUs (in terms of value of shares to be offloaded) could help raise more than R54,000 crore for the government. These include miners Coal India (CIL) and NMDC, and metal producers, SAIL and Hindustan Copper. CIL alone could fetch the government in excess of R35,000 crore. Most of these stake sales are expected to be via the offer-for-sale (OFS) route.
“It is not that the desire to disinvest was not there earlier, but the market conditions did not allow the plans to materialise. Earlier it was the fiscal compulsion that compelled the government to look at stake sale. Now, it will be a regulatory compulsion; so the sale will be binding on the government,” said a merchant banker. Overall disinvestment proceeds in FY14 amounted to R22,856 crore against an earlier estimated target of R54,000 crore.
Experts suggest the PSU stake sale will be smooth given the three-year time for the government. “There is a good deal of appetite for PSU firms as indicated by the recent success of the CPSE ETF issue. So, provided the pricing is taken care of, the stake sales should go through easily,” said the banker. He, however, added the government should not wait till the last moment to begin the stake sales in large PSUs such as Coal India.
Some experts believe the government may find it difficult to offload stake in a few small PSUs such as Andrew Yule, ITI, Madras Fertilizers and Scooters India. “Not all government companies are attractive; there might not be enough buyers for these smaller firms,” said another investment banker. He believes the government might opt to club some of these smaller firms under a large basket and sell it as an ETF.
In 2013, the government sold shares in seven PSUs through offer for sale (OFS) mechanism. While stake sales in NTPC and SAIL — two of the biggest for the year that took place in the quarter ended March 2013 — added close to R12,900 crore to the government’s kitty, LIC is believed to have supported the dilution, especially in case of SAIL. According to BSE filings, LIC’s stake in SAIL jumped from 4.93% to 7.94% in that quarter while that in NTPC increased from 6.2% to 7.66%.