Govt tweaking PSU stake sale norms to lure retail investors
8 April 2013 1:53 AM GMT
The Department of Disinvestment is working on tweaking the offer for sale (OFS) mechanism for Public Sector Undertakings stake sale by carving out a separate 5 per cent category for retail investors.
'We are looking at creating a separate bucket for retail investors. We will be discussing with Sebi if 5 per cent could be reserved for retail buyers,' a senior Finance Ministry official said.
In the PSU stake sale under OFS mechanism or the auction route, retail investors get a very small portion as bulk of issue is cornered by institutions, who put bids at rates higher than the base price.
In public issues — Initial Public Offer (IPO) or Follow on Public Offer (FPO) —35 per cent is reserved for retail investors but there is no such reservation in the OFS. Retail investors are allowed to invest Rs 2 lakh in IPOs.
Under the OFS, 25 per cent of the issue is reserved for mutual funds and insurance companies.
'We want retail investors to participate in PSU stake sale programme. The disinvestment programme should be all inclusive. Since retail cannot compete with institution pricing, we are thinking of reserving shares for them,' the official said.
A decision to this regard would be taken after consultation between the disinvestment department, Sebi and merchant bankers among others, the official said.
Market regulator Sebi had last year allowed companies to come out with OFS for diluting promoter holding and achieve the minimum 25 per cent public shareholding norm by June and 10 per cent for PSUs by August 2013.
Emerging as the most-preferred share sale route for listed firms, the OFS mechanism has been used by as many as 35 companies to raise a collective amount of over Rs 43,000 crore since its launch. Last fiscal, the government divested stake in seven companies by way of OFS to raise Rs 23,900 crore. However, allocation to retail investors was very less as institutional investors garnered majority of the pie.
COAL INDIA LTD STAFF PROTESTS AGAINST STAKE SALE GO ON; DOD SET TO STUDY MINISTRY & PLAN PANEL COMMENTS
Various ministries are required to submit their inputs by Monday to the Department of Disinvestment (DoD) on the draft Cabinet note for up to 10 per cent stake sale in Coal India.
‘DoD has asked the ministries, including Coal, as well as Planning Commission to send their comments with regard to stake sale in Coal India by 8 April,’ according to an official.
The government is expected to sell up to 10 per cent of its stake in the world’s largest coal producer CIL through offer for sale route in the first quarter of this fiscal.
The Finance Ministry had earlier moved a draft note of the Cabinet Committee on Economic Affairs for inter- ministerial comments for stake sale in CIL.
Meanwhile, a section of CIL employees has warned of going on strike if government goes ahead with stake sale proposal.
‘We plan to go on strike if government goes ahead with its proposal of stake sale in Coal India,’ Indian National Mineworkers Federation Secretary General S Q Zama had said.
The union last month in a letter to Coal Minister Sriprakash Jaiswal had raised objections to the stake sale.
The government currently holds 90 per cent stake in CIL.CIL got listed on the bourses in 2010 after government offloaded 10 per cent of its stake for Rs 15,199 crore.
The government plans to raise Rs 40,000 crore by way of PSU stake sale this fiscal.
'We are looking at creating a separate bucket for retail investors. We will be discussing with Sebi if 5 per cent could be reserved for retail buyers,' a senior Finance Ministry official said.
In the PSU stake sale under OFS mechanism or the auction route, retail investors get a very small portion as bulk of issue is cornered by institutions, who put bids at rates higher than the base price.
In public issues — Initial Public Offer (IPO) or Follow on Public Offer (FPO) —35 per cent is reserved for retail investors but there is no such reservation in the OFS. Retail investors are allowed to invest Rs 2 lakh in IPOs.
Under the OFS, 25 per cent of the issue is reserved for mutual funds and insurance companies.
'We want retail investors to participate in PSU stake sale programme. The disinvestment programme should be all inclusive. Since retail cannot compete with institution pricing, we are thinking of reserving shares for them,' the official said.
A decision to this regard would be taken after consultation between the disinvestment department, Sebi and merchant bankers among others, the official said.
Market regulator Sebi had last year allowed companies to come out with OFS for diluting promoter holding and achieve the minimum 25 per cent public shareholding norm by June and 10 per cent for PSUs by August 2013.
Emerging as the most-preferred share sale route for listed firms, the OFS mechanism has been used by as many as 35 companies to raise a collective amount of over Rs 43,000 crore since its launch. Last fiscal, the government divested stake in seven companies by way of OFS to raise Rs 23,900 crore. However, allocation to retail investors was very less as institutional investors garnered majority of the pie.
COAL INDIA LTD STAFF PROTESTS AGAINST STAKE SALE GO ON; DOD SET TO STUDY MINISTRY & PLAN PANEL COMMENTS
Various ministries are required to submit their inputs by Monday to the Department of Disinvestment (DoD) on the draft Cabinet note for up to 10 per cent stake sale in Coal India.
‘DoD has asked the ministries, including Coal, as well as Planning Commission to send their comments with regard to stake sale in Coal India by 8 April,’ according to an official.
The government is expected to sell up to 10 per cent of its stake in the world’s largest coal producer CIL through offer for sale route in the first quarter of this fiscal.
The Finance Ministry had earlier moved a draft note of the Cabinet Committee on Economic Affairs for inter- ministerial comments for stake sale in CIL.
Meanwhile, a section of CIL employees has warned of going on strike if government goes ahead with stake sale proposal.
‘We plan to go on strike if government goes ahead with its proposal of stake sale in Coal India,’ Indian National Mineworkers Federation Secretary General S Q Zama had said.
The union last month in a letter to Coal Minister Sriprakash Jaiswal had raised objections to the stake sale.
The government currently holds 90 per cent stake in CIL.CIL got listed on the bourses in 2010 after government offloaded 10 per cent of its stake for Rs 15,199 crore.
The government plans to raise Rs 40,000 crore by way of PSU stake sale this fiscal.
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