‘Sebi should decide fast on halting PSU stock trade sale day’
Concerned over punters beating down the stock price of PSUs ahead of disinvestment, the government wants market regulator Sebi to decide quickly on a proposal to halt trading in shares of such firms on the day of their stake sale as also change the reporting norm. Currently, once a disinvestment proposal is firmed up, the decision has to be intimated to the stock exchange two days before the sale.
This gives time to brokers to hammer down the stock price and as the normal trading in shares is permitted on the disinvestment day, it often hampers the best price realisation of the government stake. “In the so-called interest of investors, it is the genuine retail investors who lose out as the market value of the company declines. At the cost of retail investors, the short traders gain. Sebi should look into this aspect and decide,” a top government official said. Sebi had last month sought public comments on Department of Disinvestment’s (DoD) proposal for halting secondary market trading in PSU stocks during Offer For Sales (OFS) and for holding such share sales on Saturdays.
Also, the DoD wants the intimation for the <g data-gr-id="50">sale sale</g> to be made just the evening before the OFS. The last date for public comments on the proposals was April 18. The shares of Coal India were hammered by about Rs 20 from the time the share sale was officially <g data-gr-id="48">announced,</g> while for REC the <g data-gr-id="51">scrip</g> was hammered by about Rs 15, the official added. This led to a loss to the exchequer of Rs 1,200 crore and Rs 70 crore due to the loss in value of Coal India and REC. “Retail investors are not bothered whether the notice period is one day or two days. For retail investors to participate, we do a lot of market building. But ultimately they lose out on valuation because of punters,” the official added. The official said DoD had in March suggested to Sebi to also reduce the mandatory notice period for OFS to one day, from two days currently, and to restrict trading in the concerned stocks within a price band on the day prior to the share sale.
The DoD’s apprehensions <g data-gr-id="31">stems</g> from the fact that during divestments through the OFS route, the secondary market price could dip below the proposed OFS price and thus hamper the share sale process. “If we had our way, the DoD would not do any further disinvestment till its proposals were acceded to. Reducing the notice period would help get <g data-gr-id="28">better</g> valuation for the <g data-gr-id="32">scrip</g>,” the official added. The Finance Ministry has set a target to <g data-gr-id="33">mop up</g> of Rs 69,500 crore through PSU disinvestment. Of this, Rs 41,000 <g data-gr-id="34">cr</g> is to come from minority stake sale in PSUs and Rs 28,500 <g data-gr-id="35">cr</g> from <g data-gr-id="27">strategic</g> stake sale. The government has already identified over a dozen PSUs, including IOC, NTPC, National Fertilisers, MMTC, Hindustan Copper.
FPIs dump equities, debt of more than $2.3 bn in May
Overseas investors have pulled out more than Rs 14,000 crore ($2.3 billion) from the Indian capital markets since the beginning of the month amid continued taxation worries. The debt market has seen steeper outflows than equities. During January to April, investment by foreign portfolio investors (FPIs) totalled Rs 94,241 crore, but month-on-month analysis showed the fund flows are on a decline.
FPI investments in January this year stood at Rs 33,688 crore, before dropping to Rs 24,564 crore in February, Rs 20,723 crore in March and Rs 15,266 crore in April. However, in May things took a turn for the worse as FPIs withdrew an estimated Rs 14,674 crore ($2.3 billion) during the month so far, according to the latest data from depositories. This included an outflow of Rs 5,867 crore from the equities and another Rs 8,807 crore from the debt markets.
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