PSU disinvestment may not revive market

"Disinvestment is not the solution for reviving the primary market as investors might not come back to the market after subscribing to the shares of public sector companies," former SEBI member and director, Society for Capital Market Research and Development, LC Gupta said.

The cabinet committee on disinvestment had cleared yesterday a disinvestment programme involving privatisation of India Tourism Development Corporation (ITDC) and part sale of government equity in Mahanagar Telephone NigamLtd (MTNL), Indian Oil Corporation (IOC), Gas Authority of India Ltd (GAIL) and Videsh Sanchar Nigam Ltd (VSNL). Other companies listed for disinvestment in 1999-2000 include Hindustan Zinc, Hindustan Latex, Madras Fertiliser and Central Electronics Ltd.

Dutt said most of these PSUs were already listed on the stock markets and it would be difficult to offer these shares at a massive discount.

Gupta said investors still have faith in PSUs and subscribe to their issues but whether they will have similar faith in private sector companies is doubtful.

However, Prime Database managing director Prithvi Haldea said issues of these PSUs would get a good response from the investors – specially smaller ones — which could revive the markets.

He said if the issues are attractively priced, ie; at discount to the market prices, investors could be brought back to the primary market.