PSEs could keep 5% of shares being offloaded for employees

Written by Subhash Narayan | New Delhi | Updated: Sep 10 2012, 07:17am hrs
The finance ministry has suggested that public sector enterprises (PSEs) could reserve up to 5% of the shares being offered to investors under the disinvestment initiative for its employees. It has said that employees could subscribe to the shares at a discount of 5% to the lowest cut-off price or the price discovered after the completion of share sale under the offer for sale (OFS) or the institutional placement programme (IPP) routes.

Companies are now not permitted to reserve shares for their employees under either OFS or IPP routes that would be adopted widely for PSE share sale offers this fiscal. The government hopes that by bringing employees into such offers, the employee unions' resistance to stake sales could be overcome, besides increasing the market for shares on offer.

Last year, ONGC's stake sale through the auction route did not produce the desired results in terms of investor interest and, finally, the Life Insurance Corporation of India had to be roped in to salvage the offer. With the government relying in a big way on disinvestment revenue to also rein in the fiscal deficit this fiscal, it is keen to remove the obstacles on the way of the PSE stake sale agenda.

We are taking legal opinion to see whether the option for employees could be worked out in tandem with OFS and IPP routes. This would not require any approval from Sebi (the Securities and Exchange Board of India) that recently finalised regulations on the new offer options as share distribution to employees would be done separately, said a government official privy to the development.

A high-level government body has already decided in favour of bringing PSE employees on board even if the disinvestment programme is happening under the IPP or OFS routes in the case of the forthcoming issue of Neyveli Lignite. The same could be used even in the case of two other proposed issues, those of NMDC and Nalco.

As most issues proposed in 2012-13 could take the IPP or OFS routes, the new gateway for employees could give the programme the much-required push, said a top official of a navratna company, asking not to be named.

The government proposes to raise Rs 30,000 crore this year from disinvestment proceeds. Given that it could raise only Rs 13,894 crore from share sales last fiscal against a target of Rs 40,000 crore, the government is looking at all options to see that the offers are fully subscribed and gets wide investor participation. It is expected that despite some resistance and market volatility, some of the proposed disinvestment offers would be pushed through.

The department of disinvestment is also working against time to comply with Sebis minimum public shareholding norms whereby all state-run companies should reach at least 10% public shareholding by August 31, 2013. Sebi also wants all listed companies, where public holding is less than 25%, to divest their shares.

Piece of the pie

* Bringing staff into offers would increase market, decrease union resistance

* Employees could subscribe to the shares at a discount of 5% to the lowest cut-off price

* Disinvestment in Neyveli Lignite, NMDC and Nalco could see staff participation