As the disinvestments season gets off to a start with Satlaj Jal Vidyut Nigam (SJVNL) debuting on markets on April 29, the government is hoping for a favourable response from the retail investor. Last time the government sold shares in state-owned companies, retail investors largely stayed away and the disinvestments target of Rs 25,000 crore finally fell short by Rs 3,000 crore.
The government?s optimism stems from three factors: (1) New selection criteria for bankers which focusses on quality more than just low fees, (2) discounts to retail investors and (3) the decision to reimburse brokerage fees to merchant bankers.
Disinvestment secretary Sumit Bose told FE: ?But in certain cases, as far as pubic ownership is concerned, it will not happen only through retail (interest); it will also happen through mutual funds and insurance companies.?
The Centre plans to sell stakes in at least one company every month this fiscal to raise the budgeted Rs 40,000 crore. The government has already begun the process of appointing bankers for Coal India IPO, where it will sell 10% stake to raise roughly $2.7 billion in what would be the biggest PSU share sale this year. The request for proposal (RFP) for Engineers India will be invited by the weekend.
The government feels retail participation will be much more robust for IPOs than follow-on public offers (FPOs).
?SJVNL issue is hitting the market on the April 29. It?s an IPO; so we should do well with the retail (segment) in this. In FPOs, there is a discovered price, and retail investors have the choice of going to the market and getting the shares immediately instead of having to wait. Even FPOs in the private sector have not done well,? Bose said. Currently, shortlisted bidders are selected purely on the basis of financial bids and the lowest bid price has to be matched by others, a practice which allows firms with deeper pockets to dominate the entire selection process.
?A major change in the RFP for Coal India is the ?quality-cum-cost? based system for selecting merchant bankers. Here, 70% weightage is given to the technical bid and 30% to the price bid and the two are combined. And then, you come up with the new order. In this, the lowest bidder may be the lowest evaluated (known as H1) or may not. Whoever is then the lowest-evaluated bidder combining both the factors that bidders? fee will have to be matched by all the banks,? Bose said.
There is, however, a caveat in that. If a banker has actually quoted lower fee than what is quoted by the H1 bidder, then he will get that, he added.
