The government?s disinvestment programme for next fiscal may hit a bump as at least four companies identified under the exercise are yet to begin appointing independent directors to comply with Security and Exchange Board of India?s (Sebi) clause 49 listing norms. The companies including Hindustan Copper, National Building Construction Corporation, Rashtriya Ispat Nigam and MMTC have not yet started the process of identifying indemenpent directors. Going by the ONGC example, this could hinder the market offerings of companies, delaying the entire disinvestment prgramme of the government.
Clause 49 of Sebi?s listing agreement requires a company to have at least 50% idependent directors on their boards in case a company has an executive chairman. Non-compliance of this regulation prevents a company from getting listed. As per regulations, the market regulator also does not recognise government nominee directors on PSU board as independent directors.
Rashtriya Ispat Nigam, a navratna company under the ministry of steel, has six active board members including its CMD PK Bishnoi. Moreover, it has two government nominees and four independent directors, taking the total to 12 members. As per norms, the ministry of steel will have to nominate two more independent directors for it to meet Sebi norms.
Similarly, NBCC, under aegis of the urban development ministry, has four directors on its board. The board presently comprises CMD VP Das, one active member and two government nominees. The company will have to appoint two more independent directors before it can hit the market in the second quarter as per government sources. The government is planning to dilute 10% of its stake in RINL and NBCC. Both the companies are fully owned by the government. RINL needs to divest 10% of its stake and list on the bourses in order to keep its navratna tag.
The seriousdness of the issue comes from the ONGC experince, where apart from other reasons, one of the main reasons for the delay has also been non appointment of independent directiors. The company has been struggling to compy with clause 49 norms for last few months without much success. The department of disinvestment is expected to bring out public issues of NBCC, MMTC and Rashtriya Ispat Nigam in the second quarter of next fiscal. In case of MMTC, the government is likely to offload 10% stake in the company. Under the administrative control of the commerce ministry, the government holds 99.33% stake in the company.