For the first time since the offer-for-sale (OFS) mechanism was introduced last year, the government is considering reserving a portion of the offering for employees. The government has sought the views of the capital market regulator as it wants to allot shares to employees as part of the forthcoming OFS of NHPC.
The government intends to divest 11.36% stake in NHPC that has an employee strength of 10,419. The government is considering reserving 10% of the OFS size for employees and allotting them shares at a discount of 10% to the cut-off price.
The department of divestment has invited tenders from merchant bankers and law firms for managing the issue, including assisting the government in discussing the matter with the Sebi.
This assumes significance as unlike the guidelines for an initial public offering (IPO), norms governing an OFS do not allow for any reservation for a certain set of investors. Under OFS, the issuer company announces a floor price and all investors — institutional or retail — can bid for the shares.
Legal experts say that Sebi is expected to allow the government-owned entity to allot shares to employees as the company is already compliant with the public shareholding norms and the stake sale is only to further dilute the promoter stake. The government currently holds a 86.36% stake in NHPC.
“In the case of NHPC, the government is not using the OFS route to comply with Sebi’s norms and so the regulator can allow for this structure. However, Sebi needs to be convinced on the finer details as this would be the first time that a company is doing something of this sort,” says a partner of a law firm, which is going to pitch for this issue.
According to another legal expert, NHPC will manage to get an exemption from the “restrictions” with regards to “reservation for a specific investor class”.
A section of market players feel that this would also soothe the mood amongst the employee union that has opposed the manner in which the government has been selling stake to institutions as part of the divestment programme.