DoD mulls 5-6% discount in all PSU stake sale offers

Encouraged by the positive response to the offer for sale (OFS) for mining major NMDC, the department of disinvestment (DoD) is considering giving 5-6% discount (on the market price) in all forthcoming PSU stake sale offers, according to a senior official who requested anonymity.

?The issue of NMDC was subscribed 1.73 times, fetching the government R6,000 crore via a stake sale of 10%, thanks to the realistic pricing of the issue,? he said. The department feels that a more attractive pricing of the offer could get many more investors who, otherwise, might not come in.

In the case of NMDC, the bulk of the bids came from FIIs at an average price R150 per share, while state-owned financial institutions, including LIC ,took part in the bidding in a big way, mostly offering the floor price at R147 per share.

In efforts to optimise its chances of getting maximum funds through the OFS route, the department is working on some pre-determined incentive for the merchant bankers for managing the upcoming issues.

The official added that incentive will be in the form of a small share of the sale proceeds to encourage them to get more foreign investments. “Depending on the size of the offer and its success, the merchant bankers will be given an incentive determined by set guidelines soon to be laid out by the department?.

?Till early January, foreign institutional investors will not be available, so, the remaining issues are likely to happen after the first week of 2013,? the official added.

The NMDC issue is likely to be followed by National Thermal Power Corporation (NTPC) and, then, Oil India (OIL). Other offers will include MMTC and Nalco. With only four months in hand, five issues are expected to come back-to-back.

The issues of OIL and NTPC are likely to hit the market in January. The groundwork for the OIL issue is already completed with merchant bankers in place.

The issue is expected to fetch around R2,500 crore. Another 9.5% disinvestment in NTPC is expected to bring in R12,000 crore. The government will be appointing five merchant bankers in the first week of January.

The government is aiming to earn R30,000 crore through disinvestment of its part equity. With, improvement seen in the market conditions, hopes have risen that government might just be able to meet its disinvestment target. The Cabinet Committee on Economic Affairs has also approved disinvestment in BHEL, Rashtriya Ispat Nigam and SAIL.