Dropping the French auction route that resulted in poor subscription of NTPC and REC public offers, the government will use the standard book-building method for share sale in the country?s largest miner NMDC that is estimated to fetch Rs 15,000 crore. The government will also give a ?steep discount? to retail investor on the lower end of the price band to make the offer attractive, an official said.
An empowered group of ministers will finalise the price band as well as the discount for retail investors on Monday. ?NMDC disinvestment is the last one (for 2009-10) which will be concluded by the end of this year,? disinvestment secretary Sumit Bose said. NMDC stock closed at Rs 433.75, up 0.28%, at the Bombay Stock Exchange (BSE) on Wednesday.
In a book-building method, which will be followed for NMDC, a price band is set and investors bid within the set range. The government will be giving a discount to retail investors on the lower end of the price band.
In a French auction method that was used in follow-on public offers of NTPC and REC, institutional investors bid above a base price and retail investors bid at floor price. Institutional investors bidding at higher price are given priority during share allotment.
Kotak Mahindra Capital, UBS, Citigroup, Morgan Stanley, Royal Bank of Scotland and Edelweiss Capital are arrangers to the NMDC issue. The government will sell an 8.38% stake in NMDC, which will be down to 90%.
In the next financial year, the government will disinvest at least 12 PSUs, beginning with Satluj Jal Vidyut Nigam to achieve the Rs 40,000-crore target, a senior official said. The finance ministry?s internal calculations show that if market conditions are good, then collections can be even higher, he said.
When asked by FE how many companies government will disinvest to raise Rs 40,000 crore, Sumit Bose said, ?How we reach that figure, which are the companies or PSUs to be taken up that?s a dynamic exercise, an ongoing exercise in consultation with the line ministries that exercise we are currently completing.? As time goes by, certainly things will be out in the public domain which ones will be taken up for disinvestment, he added. Other companies for disinvestment include Engineers India Ltd, BSNL, Manganese Ore India Ltd, SAIL and Coal India.