The government has taken a hefty notional hit — estimated at around Rs 1,600 crore — on its balance holdings following the disinvestments in four public sector undertakings: CMC Ltd, IBP Ltd, VSNL and IPCL.This is because the government has not sold its remaining stakes in these four PSUs when their stock prices hit their highs around the time the selloffs were taking place, and subsequent open offers were under way. According to back-of-the-envelope calculations, the government’s remaining holdings in these companies could have generated as much as Rs 3,538 crore or so at the peak rates, had the advantage of the high prices been taken. The rough estimates of what the government could have generated at peak prices works out to a notional loss of around Rs 1,600 crore. According to the respective shareholders’ agreements signed between the government and the strategic partners, the government is free to sell its balance holdings in such PSUs at any time after the closure of the transaction, after providing the right of first refusal to the strategic partner. Explaining the rationale for the government’s decision on balance holdings, Disinvestment Secretary Pradip Baijal: “Had we sold off our remaining stake immediately, questions would have been raised on issues relating to the fate of the employees, possible assets stripping, the land belonging to the company and other things. These are the concerns. However, we will sell our balance holdings at an appropriate time.” Consider the broad estimates. In CMC’s case, the selloff took place at Rs 203 per share for the 51 per cent stake. Thereafter, the CMC stock touched a high of Rs 750. If this stake was sold at the high of Rs 750, the government would have fetched an additional amount of Rs 375 crore. The stock price is now at Rs 552.65 on BSE on Wednesday.In the IBP case, the selloff happened at Rs 1,551 per share. The stock price has subsequently declined to Rs 282.40 per share on BSE. For nearly three months after the bids were opened, the IBP stock traded at between Rs 875 and Rs 975 per share. Even if the government had sold its remaining stake at the average of Rs 925, it would have generated an additional Rs 525 crore by way of disinvestment proceeds.VSNL’s disinvestment took place at Rs 202 per share. The stock price has subsequently declined to Rs 113.15. The government still holds a 25 per cent stake in the company, that is 7.20 crore shares. During April-May 2002, the VSNL stock traded at between Rs 185 to Rs 195 per share, or an average price of Rs 190 per share. At this price, the government could have generated Rs 1,368 crore additionally for itself.The IPCL selloff was made at Rs 231 per share and the stock price traded at Rs 154 for quite some time after that. The government has a residual 33 per cent in the company, that is 8.25 crore shares. At Rs 154 per share, the sale of the residual holdings could have generated an additional Rs 1,270 crore for the government. The IPCL stock price has now collapsed to Rs 73.45 on Wednesday on BSE.
