Birendra Kumar, managing director of the SBI Capital Markets, in a paper presented at the Ficci seminar on "Restructuring of PSUs" has suggested that the privatisation ministry should be given the authority to decide on quantum and mode of disinvestment to facilitate the privatisation process.

Kumar also underlined the need for a clear cut privatisation policy which should, "broadly lay down the guidelines for privatisation such as how PSUs would be categorised for the purpose, modes of privatisation to be employed, sale of shares to financial or strategic investors and sale of assets with/without employees."

This, however, should precede a clear will on the part of the government for disinvestment. He pointed out that "privatisation is political at all stages" and added that transparency would strengthen support for privatisation.

Kumar pointed out that theprocess of disinvestment should start with a strategic review to be followed by preparation of sale. The preparation of sale, he said, should involve implementation of physical, financial and organisational restructuring or labour shedding. He also underlined the need for drafting of definitive agreements of sale and related agreements such as supply and off-take agreements, shareholders' agreement etc.

He said that advertisement and publicity for the transaction should include road-shows to interest potential investors, invite expressions of interest and statement of qualifications. He suggested that more detailed confidential information might be provided to short-list bidders.

According to Kumar, the government should sign definitive sale agreements immediately after selection of successful bidder.

Referring to valuation of enterprises, he said, it should be carried out using methods which were based on future earnings or cash flows such as the discounted cash flow method, price earnings multiplemethod or enterprise value/operating cash earnings method.