Disinvestment secretary Sumit Bose is confident that this year?s disinvestment season will open on an optimistic note, with aggressive participation from retail investors. The Centre is planning to sell stakes in at least one company every month for the next 12 months. In a wide-ranging interview with FE?s Sunny Verma, Bose elaborates on the government?s disinvestment dream, the number of firms ready to hit the market, the changes in the selection process of merchant bankers, added incentives and discounts to retail investors and more. Excerpts:

How will the disinvestments of PSUs pan out this fiscal?

The case of SAIL has recently been approved by the Cabinet. We have also secured the Cabinet?s approval for EIL, in addition to SJVN Limited. For Coal India we don?t have the Cabinet?s approval yet. Only some preliminary steps in the appointment of bankers are being taken. We are of course, in dialogue with the ministries. This is a list which will grow.

How has the response from administrative ministries been?

I think the response has been extremely positive. In certain cases, like in the case of SAIL, they have taken it to the Cabinet. In other case, we approach the Cabinet where there is pure disinvestment.

Is there also a proposal for divesting stakes in Nalco?

The proposal for Nalco is with the ministry of mines. They have to take a call on that first. We have written to all the ministries concerned regarding disinvestment and have requested them to examine each PSU with reference to the policy. Some PSUs obviously don?t qualify because either they are not making profits or they are Section 25 companies. For others, there may be some peculiar problems that they are grappling with and so they don?t want to disinvest.

What are Section 25 companies?

They are companies that fall under the Section 25 of the Companies Act. They are basically non-profit or not-for-profit companies. These are not eligible for disinvestment as per the extant policy.

How many companies will have to be disinvested for achieving the Rs 40,000-crore target this fiscal?

You already have 5-6 companies right away. We are still in dialogue for the others. So at this moment, it will be too early for me to tell you the names. I don?t think we need to have a list for the entire year. As we move from quarter-to-quarter, we know what we have to do.

Can we at least expect one stake sale every month in the current fiscal?

We are certainly targeting that. But it may not necessarily happen every month. After all, it is right at the end of April that we are managing SJVNL. But on an average, we should have that.

Markets are better now compared to the time when you divested in NMDC. Do you expect better subscription?

We hope so. The strength of PSUs is more pertinent than the market because we are taking the best of the PSUs to the market.

NTPC, REC and NMDC were all prized companies but they did not elicit an enthusiastic response from retail investors. What are your views?

In every public issue we are coming out with now, we are building on previous lessons. As I mentioned to you, in FPOs, getting the retail investor is difficult. It?s not that we are not hoping at all. After all, the entire 35% is there for the retail investors because the idea is to bring in retail investors. But in certain cases, as far as pubic ownership is concerned, it will not happen only through retail, it will also happen through mutual funds and insurance companies. Retail is of paramount importance. That?s the reason we are talking to brokers and investors? associations.

Will you give any discount to retail investors?

Retail discount was given in NMDC. There is no uniform decision, but we know that when we go to the CCEA (Cabinet Committee on Economic Affairs), in certain cases, we are talking about the discount. I am sure that you would see it in SJVNL and other issues that follow. But this is all subject to the EGOM (empowered group of ministers) taking a final call on this?on pricing as well on discount.

Why don?t you decide on a minimum 5% discount for retail investors in every issue?

The idea is that the discount should be there when the issue happens. That is evident now. Where you didn?t get the 5% discount was where we did French auction.

So, will we not see LIC having to bailout the issues the next time?

LIC is in the business of doing this (investing). They hold money on behalf of the public and they invest in equities in the normal course. They have done so even for private sector issues. If you look at some of the large private sector issues, you would find that they have invested as much, if not more. So they take a call. In the case of REC, they took a call but on the price at which they would not get. And they did not get it. In NMDC, yes, they invested substantial amount, as in the case of NTPC. I don?t think we should read too much into whether LIC will have to come in or not. Why should LIC not come in, they have every right to invest and they have a professional management. So let them come.

There is a perception among bankers that low transaction fees was one of the key reasons for tepid investors? response in previous PSU stake sales .

If the bankers are saying so, that might not be a professional approach. It is not that someone is pressurising them to quote zero fees. Of course, they have been expressing the concern about the low fees.

Will this disinvestment season begin with Coal India?

No. This season has actually begun with SJVNL. That issue is hitting the market on 29th April. It?s an IPO so we should do well on the retail front. In FPOs?like those of NMDC, REC and NTPC?where there is a discovered price, retail investors have the choice of going to the market and getting the shares immediately (in the secondary market) instead of having to wait. So, overall, even private sectors FPOs have not done well as far as retail is concerned.

When will you launch the Coal India IPO?

Coal India is yet to be approved by the Cabinet. So we have said in the RFP (request for proposal) for merchant bankers that it is subject to the Cabinet?s approval. EIL (Engineers India Ltd) has secured the Cabinet?s approval.

In the case of EIL, you issued bonus shares to existing shareholders. Is it a policy decision?

Of course, that is a policy decision. Whether there will be more bonus share issues will depend upon case-to-case basis. We will have to look at each PSU and see what sort of reserves they have.

Can you elaborate on the new criterion for the selection of merchant bankers?

This is a quality-cum-cost based system. Short-listing on the basis of technical criteria was being done even in the past. After you are short-listed, you are called for financial bids and whoever is the lowest and how many bankers we have to select, have to match the lowest fee.

In this new process, what happens is 70% weightage is given to technical bid and 30% to price bid and then two are combined. And then you come up with the new order. In this, the lowest bidder may be the lowest evaluated (what is in this parlance known as H1) or may not. Whoever is the lowest evaluated bidder then, combining both the factors, the bidder?s fee will have to be matched by all the banks. There is, however, a caveat in that. If a banker has actually quoted a lesser fee than what is quoted by the H1 bidder, he will get that.

What are the other changes?

The other major change is that since the entire policy is focused on public ownership of PSU shares, certain changes have been made. Basically, we have also been talking to the distribution channels and the brokers.

Last week, I met brokers in Mumbai. Apart from other things, it emerged that the selling commission should be known before hand and it should be given out properly. So we have taken that into account. We also saw BRLMs (book running lead managers) getting an all-inclusive fee, which is sometimes not very transparent. Now we have made it transparent. We will reimburse brokerage fee to merchant bankers, provided there is proof it has actually gone to the brokers.