To ensure that a large batch of disinvestment proposals hit the primary market this fiscal, the government would depend on the follow on public offers from listed companies, instead of pushing for initial public offers, as the shelf of such proposals is nearly empty now.
This means 2009-10 may not see new public sector firms debuting in the stock market, after NHPC and Oil India. For the stock market, however, even that would spell good news as the available stock of blue chip public sector companies will expand.
The 47 public sector companies listed on the stock exchanges make up 28% of the market cap of BSE, making them the biggest block in the market.
Unlike an initial public offer, listed companies have an advantage, as they are already past two biggest obstacles?the clearance from Parliament and line ministries. So they can be kept ready with little fuss this year. But these will not come in quick succession. ?We have identified a number of proposals (for disinvestment) but these cannot be bunched together as it can have a depressing impact on the market. As and when the market improves, they (disinvestment proposals) will be announced,? finance minister Pranab Mukerjee told The Indian Express group last week.
When an unlisted public sector enterprise plans an IPO, along with the administrative clearances required at multiple levels, they often need a parliamentary approval. This takes time. ?If a firm begins all paperwork in earnest now, it still can only hit the market in April 2010,? a top government official told FE .
For instance, Coal India Limited officials met market regulator Sebi to understand IPO norms on Tuesday but apart from the plethora of clearances, the Centre would need to amend the Coal Mines Nationalisation Act before the company can file a draft red herring prospectus with Sebi. In between the plan will travel from its board of directors, the administrative ministry, the disinvestment department, the Cabinet and thereon to Sebi? which will take at least six months.
The first government firms to list on the bourses in 18 months, OIL and NHPC, had their public offers cleared in UPA?s first innings.
While NHPC?s shares debuted on a disappointing 2.08% premium, OIL?s public offer, expected to raise nearly Rs 5,000 crore, will open on Monday.
Therefore, the shelf of PSUs to tap the markets in coming months is limited to listed firms, where government stake is still over 90%. The Centre holds around 99% in MMTC, NMDC and Hindustan Copper, while its stake in Neyveli Lignite, State Trading Corporation of India, Rashtriya Chemicals & Fertilisers and Engineers India Limited is above 90%.
The need for pushing the disinvestment agenda was underlined by Planning Commission deputy chairman Montek Singh Ahluwalia on Tuesday. Speaking at a meeting of the Commission, he called for a better disinvestment policy to bridge the resource gap of Rs 1,60,000 crore in the Eleventh Five-Year Plan. ?A bold and clear disinvestment programme is needed to meet some of these gaps in 2010-11 and 2011-12.?