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Journalism of Courage
Giving a twist to its stake sale programme,the government is examining a proposal to use the services of the recently approved National Asset Management Company (NAMC) Limited to buy stakes in state-run firms that are in need of funds due to the cyclical nature of their businesses.
Under the plan,the proposed firm,being set up using the assets of the Special Undertaking of the Unit Trust of India (SUUTI),would float convertible debentures to investors leveraging its own assets. The funds would then be used to buy shares of state-owned public sector firms.
The proposal is at a very initial stage. We are still looking at the pros and cons of these measures and how to structure the process. It also needs to be seen whether this will be allowed under the current accounting practices, said a senior government official involved in the process.
In March this year,the Cabinet Committee on Economic Affairs had approved the winding up of the SUUTI and transfer of its sizeable assets of about Rs 32,000 crore to the new firm,which would then buy government stakes in some public sector units.
SUUTI holds 11.54 per cent in ITC,23.6 per cent in Axis Bank and 8.3 per cent in L&T.
The governments objective in setting up the new firm was to leverage these assets of SUUTI and mobilise funds for disinvestment at times when investor interest was low.
Since the Cabinet had given approval only for the transfer of shares and had not decided on pledging the shares with banks,the government is free to leverage the funds to float convertible bonds,the official said.
The proposal,if it goes through,would be operationalised only towards the end of the current financial year,sources said,as NAMC is yet to be set up.
Further,the government is keen to go ahead with other disinvestment routes such as public issues and offer for sale before using this option, he said.
The government hopes to raise Rs 30,000 crore from the disinvestment proceeds in 2012-13. But it has not proceeded with any stake sale in the first three months of the fiscal due to poor investment sentiments. It is expected to kick off the stake sale process in July with the IPO of RINL.
