Sebi proposal can help govt get over Rs 50k-cr via stake sale

Jun 01 2014, 11:36 IST
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Sebi has now proposed that the 25 per cent limit be applied to the listed PSUs as well and has written to Finance Ministry regarding the same. Sebi has now proposed that the 25 per cent limit be applied to the listed PSUs as well and has written to Finance Ministry regarding the same.
SummarySebi has now proposed that the 25 per cent limit be applied to the listed PSUs as well and has written to Finance Ministry regarding the same.

The government can rake in more than Rs 50,000 crore through stake sales in about 30 PSUs, if a new Sebi proposal requiring minimum 25 per cent public holding in all listed firms passes muster with the Finance Ministry.

While private sector listed companies are already required to maintain minimum 25 per cent public shareholding, this limit for state-run listed entities currently stands at 10 per cent. Capital markets regulator Sebi has now proposed that the 25 per cent limit be applied to the listed PSUs as well and has written to Finance Ministry regarding the same.

As per an analysis of stakes held by the government in listed PSUs, there are close to 30 such companies where the public holding in less than 25 per cent and Sebi has proposed that the government pares its stake in these companies to 75 per cent or below over the next three years.

At the current market price, the value of additional government stakes in these companies -- that would need to be sold to meet the proposed norms -- stands at about Rs 53,000 crore. The valuation could go further up as these stake sales, if they happen, would take place over a period of three years and the markets are already in a bullish mode.

Sebi Chairman U K Sinha, who met Finance Minister Arun Jaitley last week, has said an increase in public float of listed PSUs would help deepen the markets and bring in parity with the private sector entities. However, a final decision in this regard needs to be taken by the government, he said after meeting Jaitley.

The major PSUs where government holding currently stands at more than 75 per cent include Coal India, SAIL, NHPC, NMDC and SJVN.

Moreover, there are atleast seven companies, where government stake is 90 per cent and these include MMTC, Hindustan Copper, HMT, National Fertlizers, Neyveli Lignite Corp, State Trading Corp and State Bank of Mysore.

At the current valuation, the government can garner over Rs 34,000 crore through sale of shares in Coal India alone, if it brings down its holding from 89.65 per cent to 75 per cent.

The proposal would also help in promoting wider participation from investors and boost government's plan of raising funds through disinvestment.

A similar time-frame of three years was given to private sector companies in 2010 to achieve minimum 25 per cent public holding, while PSUs were also given 3 years in the same year to increase their public shareholding to at least 10 per cent.

The deadline for 25 per cent minimum public shareholding requirement for private companies ended in June 2013, while the same for the government to reduce its stake to at least 90 per cent in PSUs was August 2013. When the norms were proposed in 2010, more than 200 companies needed to comply.

Incidentally, Sebi had first proposed in June 2010 that all listed companies ó including PSUs ó would need to have a minimum public shareholding of 25 per cent.

However, in August 2010, the norms were amended to revise public sector companies' minimum public shareholding norms to 10 per cent (from 25 per cent) within three years.

"In 2010, when it was done, at that time government had a position that in one particular PSU if they float 25 per cent in one go, it will be a problem but now the government has to revisit it," Sinha had said last week.

"The government has to do...the rules are notified by the government," he had added.

These directions issued by Sebi against these firms included freezing of voting rights and corporate benefits such as dividend, rights and bonus shares among others.

All PSUs eventually managed to meet the 10 per cent minimum public holding norms, although the regulator had allowed the government to transfer its holding in excess of 90 per cent in sick PSUs to Special National Investment Fund.

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