The government, which will take the offer-for-sale (OFS) route for its planned PSU share sale, may increase the retail quota for these from 10%, as is the case now, to up to 20% on a case-by-case basis. This follows the Sebi?s views conveyed to it recently that the retail quota could be increased.
The Centre’s ambitious R58,425 crore disinvestment plan for this fiscal will kick off with sale of 5% in SAIL by the end of September or early next month, sources told FE.
The finance ministry prefers the OFS route to sell its stake in 11 PSUs as it is a faster process than follow-on public offers (FPO). The department of disinvestment reckons that while the FPO route takes about 3-4 months for all regulatory clearances, the OFS route is often completed within 15 days to a month. The only drawback of the OFS route is that the quota for retail investors is practically kept at 10%, while for FPO, it is 35%. ?Under the OFS route, a minimum of 10% of any issue is reserved for retail investors (in practice, the retail quota has never gone beyond this ). Sebi has given the government a free hand in deciding on that,? a senior finance ministry official told FE.
?We will follow a certain criteria for increasing retail participation in any PSU’s stake sale. The size of the issue matters. Investor appetite for the company and sector, market conditions, these all will be taken into consideration. We will take feedback from investment bankers. If they are confident of retail investor appetite for a PSU, we may increase the quota for that company to 20%,? the official added. A former Sebi member who spoke to FE on the condition of anonymity said the market regulator can leave such decisions to the promoters, which is the government in case of PSUs.
Any final decision on increasing the retail quota for a company’s stake sale will be taken by the empowered panel on disinvestment. As reported by FE earlier, the panel, with powers similar to the disbanded empowered group of ministers of the previous UPA government, will comprise finance minister Arun Jaitley, transport minister Nitin Gadkari and the line minister of the company being discussed. In case of SAIL, the third member of the panel will be steel minister Narendra Tomar.
?Once the cabinet committee on economic affairs gives its initial go-ahead for any stake sale, we will have meetings with investors, complete regulatory formalities, deliberate with bankers, decide on the floor price of OFS, whether we should do it all in one tranche, and where to cap retail participation. Once all that is taken into account, the disinvestment department will approach the empowered panel to get the final clearance,? the official quoted above said. ?Once the nod is given, the exchanges will be notified and the stake sale will hit the markets in a few days,? the person said.
Officials say the investor roadshow for a 5% stake sale in SAIL is already underway and is being conducted by merchant bankers SBI Caps, Kotak Mahindra and Deutsche Bank. The SAIL divestment can fetch between R1,800 and R2,000 crore. The empowered panel will have its first meeting, for SAIL, by the last week of September, the officials said. The government is targeting a minimum of R43,425 crore from stake sale in 11 PSUs, of which Coal India and ONGC will be the biggest, and R15,000 crore from the sale of its stake in HZL-Balco for FY15. As reported by FE earlier, given the bull market, it could outstrip the targets by R15,000 crore. The disinvestment department has already got CCEA nods for SAIL, HAL, RINL and HZL-BALCO. It is awaiting the nod on Coal India, ONGC, and NHPC in the next cabinet meeting.