IOC,CIL issues among first lot of stake sale proposals

Both big-ticket issues to hit market in first half of the fiscal.

Written by Surabhi | New Delhi | Published: May 10, 2013 4:38:43 am

Unlike the last two financial years,when big-ticket stake-sale proposals were pushed back to the second half of the year,the government plans to kickoff its disinvestment line-up this fiscal (2013-14) with two of its mega issues — a 10 per cent follow-on-offer in downstream petroleum major Indian Oil Corporation Ltd (IOC) and another 10 per cent in Coal India Ltd (CIL) — slotted in the first batch of proposals.

The Cabinet note on IOC has already been circulated while an inter-ministerial group,which met to discuss the CIL issue on Wednesday,cleared a 10 per cent issue size. The two issues,which could cumulatively yield around Rs 27,000 crore,are set to hit the market in the first half of the current fiscal and could be instrumental in the government achieving its divestment target of Rs 40,000 crore set for 2013-14. The positive sentiment prevailing in the equity markets have further bolstered the government’s plans to push through its bigger divestment issues in the coming months.

According to government officials involved in the matter,with reforms on fuel deregulation on track,plans to sell up to 10 per cent stake in the oil refiner have got a boost.

“On the IOC disinvestment proposal,we have floated a note for the Cabinet Committee on Economic Affairs to get approval for the issue,” an official said.

In January this year,the government had begun the process of freeing diesel prices by permitting a 40-50 paise hike in retail prices and a Rs 11 increase for bulk consumers every month. The move is expected to help improve balance sheets of oil marketing firms such as IOC,which is expected to reflect in the valuation that the oil refiner gets. The government currently holds 78.92 per cent stake in IOC. A 10 per cent disinvestment in the firm would help raise about Rs 7,000 crore at current market prices. On Thursday,shares of IOC remained stable to close at Rs 293.85 apiece at the BSE.

While there is no clear timeline for the stake sale,the government is keen to make use of favourable market conditions. “It may happen in the first half of this fiscal,” the second official said.

On CIL,the government’s 10 per cent stake sale is slated for September this year. The inter-ministerial group had met to discuss the issue on Wednesday,which could raise as much as Rs 20,000 crore.

Meanwhile,other PSUs on the disinvestment radar for 2013-14 include transmission major Power Grid Corp,Engineers’ India Ltd,Hindustan Aeronautics Ltd,Steel Authority of India Ltd,Neyveli Lignite Corp,MMTC and Rashtriya Ispat Nigam Ltd.

The finance ministry has set the ball rolling on a 10 per cent further public offer in EIL. It is expected to finalise merchant bankers and legal advisers by the month end. Five investment banks,including IDFC,Edelweiss Financial Services, IDBI Capital,Kotak Mahindra Capital and ICICI Securities will hold presentations for the department of disinvestment on May 20.

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