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Disinvestment sees big year, eyes more in 2011

While the country's economy recovered smartly from a downturn this year, one thing stood out clearly. Disinvestment by central public sector enterprises, once done in fits and starts, is now a steady flow. Debobrat Ghose reports. Public sector IPOs hit the bull's eye

business Updated: Dec 27, 2010 01:09 IST
Debobrat Ghose

While the country's economy recovered smartly from a downturn this year, one thing stood out clearly. Disinvestment by central public sector enterprises (CPSE), once done in fits and starts, is now a steady flow. This, done with market momentum in a year of strong stock markets, also resulted in the finance ministry's revenue target from sell-offs being on course.

A clutch of state-owned companies went public or made follow-on offers in 2010, with Coal India jumping straight to blue-chip status in a blockbuster issue.

Against a budget target of Rs40,000 crore (2010-11), the disinvestment in six CPSEs — Sutlej Jal Vidyut Nigam Ltd (SJVNL), Engineers India Ltd (EIL), Coal India Ltd, Power Grid Corporation of India Ltd (PGCIL), Manganese Ore India Ltd (MOIL) and Shipping Corporation of India (SCI), yielded Rs22,144 crore to the government as on December 15.

While all the six issues were over-subscribed, CIL's initial public offer (IPO) emerged as the largest CPSE IPO raising Rs15,199 crore. However, due to consistent opposition from trade unions, the employees' quota in CIL IPO was not subscribed.

The capital market in 2010 witnessed an over-whelming response from retail investors, which resulted into creation of two historic records in CPSE public issues. First, more than 10 lakh retail investors applied in each of the three public issues of CIL, PGCIL and MOIL back to back.

Second, a 'never before' record was created, when the follow-up public offer of PGCIL received more than 10 lakh applications from retail investors.

"The result is a reflection of the confidence the investors have on CPSEs," says secretary, department of disinvestments, Sumit Bose. "Our aim is to promote people's ownership of CPSEs to share in their prosperity through disinvestment. This will facilitate unlocking the true value of the CPSEs for all," he adds.

Market analysts said unlike 2009, market responded more positively to CPSE issues in 2010. "The recent CPSEs, which came with public issues have strong balance sheets, reliable revenue streams and issues were reasonably priced — all these attracted the investors," says strategist & head of research, SMC Global Securities, Jagannadham Thunuguntla.

Eyeing at a better response, the government has plans to come up with public issues of the Steel Authority of India Ltd, ONGC, Indian Oil Corporation, Power Finance Corporation, Hindustan Copper, MMTC India, National Buildings Construction Corporation, and Rashtriya Ispat Nigam in the last quarter of this fiscal and 2011-12.

"The government will remain aggressive in disinvestment strategy, as long as the overall market condition remains to be strong," sums up past president, Bhopal Stock Investors' Association, Santosh Agrawal.