The stage appears set for the stalled disinvestment programme to kickstart with the capital market regulator, Securities Exchange Board of India (SEBI), ready to notify new rules in the coming days for private placement of shares to institutional investors as well as auction of shares to retail investors.This will pave the way for the government to sell equity in public sector undertakings including three big-ticket stake sales in ONGC, SAIL and BHEL, which is expected to raise a combined Rs 22,000 crore for the government.
“IPP (Institutional Placement Programme) guideline would come in next 3-4 days. Work has been done with regard to changes in regulation,” SEBI chairman UK Sinha said.
Earlier this month, the SEBI board had allowed auctioning of securities through stock exchanges and introduced a new method for institutional placement of stocks.
As per the auctioning route, a special window can be used by promoter stakeholders to sell at least 1% of the paid-up capital of a company.
This will be similar to the block-deal mechanism for secondary stock market transactions, but with lesser restrictions. Under the IPP, shares can be sold only to qualified institutional buyers.
The two new windows for stake sale by promoters are based on the same concept except that one is a wholesale route and other retail.
Instead of working out an elaborate exercise of follow-on public offers (FPOs), promoters or the government in the case of PSUs will be able to auction off their stake in a quick and simple manner.
The notification of new rules is expected to trigger a flurry of activity as the government, hit by slumping revenues and rising expenditure, run against time to garner resources by selling shares in PSUs.
The government was banking heavily on disinvestment proceeds to bolster its balance and had originally targetted to earn R40,000 crore in 2011-12. The government has, however, raised only R1,145 crore till date.
The government has already approved disinvestment in companies such as ONGC, SAIL, BHEL, Hindustan Copper and National Building and Construction Corporation. The petroleum ministry has also approved sale of a 10% stake in state-run explorer Oil India Ltd.
The proposed FPO of ONGC, valued at about R12,500 crore, has been postponed several times because of poor market conditions. Last year, the government earned R22,763 crore from disinvestment, against the targetted R40,000 crore.
In FPOs, historical trends have shown that existing retail shareholders lose out as the offering is priced lower to woo new investors.
“If we stick to the FPO route, past experiences have shown that existing retail investors interests were not protected,” a government source said.