Govt gets cracking on disinvestment

Finance Minister Pranab Mukherjee will meet the Securities & Exchange Board of India board on Friday to discuss, among other things, the disinvestment roadmap and the Budget proposal to raise the threshold for non-promoter public shareholding for all listed companies in a phased manner.

The meeting will take place a day before the minister meets the Reserve Bank of India's central board of directors, which is a customary event every year after the Budget. The practice of a post-Budget meeting with Sebi started only last year.

Sources familiar with the developments said there was no pre-determined agenda for the meeting with Sebi, but the minister was keen to discuss the do-ability of the proposal to increase public shareholding in listed companies. Sources said Sebi was expected to suggest the timeframe by which such a step could be taken.

The minister will find Sebi receptive to the ideas, as a committee set up by the regulator had earlier suggested increasing the minimum public shareholding in listed companies to 25 per cent.

According to Sebi, deep markets required larger and diversified public shareholdings, both for the private sector as well as listed public sector companies.

The finance ministry had proposed this last year, too, but the proposal could not be implemented because of adverse market conditions.

On disinvestment, the minister will seek Sebi's opinion on the market's preparedness to absorb such large public issues.

Although the Budget has projected only Rs 1,120 crore (Rs 11.2 billion) receipts from disinvestment, sources said some big-ticket initial public offers, or IPOs, could hit the markets soon.

BS Reporter in New Delhi adds: While the IPO of the country's largest hydro power producer, NHPC Ltd, will come next month, the Oil India public offer is expected in September.

NHPC plans to offer 1,670 million equity shares to investors, out of which 1,110 million would be fresh equity and the rest the government's sale of 5 per cent stake in the company.

After the issue, public shareholding in the company will be 10 per cent. "NHPC's IPO will hopefully come in August. We are moving in that direction," said Power Secretary H S Brahma.

The first oil sector disinvestment in the UPA government's tenure through the OIL offer is expected to follow soon after.

"We are planning the issue in the first week of September, subject to markets being conducive," OIL Finance Director Ananth Kumar told Business Standard.

"The market is not so bad. The two-day market fall is an aberration. OIL and NHPC should be a hit," said Kumar.

The last public sector undertaking to tap the stock market was Rural Electrification Corporation in February 2008. The issue did well, though the market had started its slide and a number of private companies, including Wockhardt and Emaar MGF, had to withdraw their IPOs.

There are quite a few others such as Coal India and Bharat Heavy Electricals Ltd in the disinvestment queue.

NHPC had filed its Draft Red Herring Prospectus (DRHP) with Sebi last August. An earlier DRHP filed by the company in 2007 was rejected owing to the lack of required number of independent directors on its board.

Kumar said OIL was finalising details of its red herring prospectus and would file the draft by the end of July.

OIL plans to offer 10 per cent of its equity to the public through issue of 26.4 million equity shares.

The Union government will sell another 10 per cent to government-run refiners, including Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation.

The company plans to launch the IPO before Sebi's clearance expires on September 10. After the IPO and disinvestment, the government's stake in the company will fall from 98.13 per cent to 78.5 per cent.