IOC, SAIL, ONGC stake sale in Jan-March: Bose
New Delhi 19-Oct-2010
Confident that there's enough liquidity in the market to absorb one big public issue a month, the Indian government is planning to sell shares of three large public sector companies--IndianOil (IOC), Steel Authority of India Ltd (SAIL) and Oil and Natural Gas Corp. Ltd (ONGC)--between January and March, disinvestment secretary Sumit Bose said.
Earlier in the year, the government had said it would raise Rs. 40,000 crore in the fiscal year to March 2011 from sale of shares of public sector companies.
It could mop up around Rs. 30,000 crore from the pro- posed public issues of these three companies alone, and revenues of the disinvestment ministry this fiscal could exceed the initial target.
The government has till now raked in Rs. 2,000 crore from the share sale of SJVN Ltd and Engineers India Ltd, and is currently selling a 10% stake in Coal India Ltd (CIL), from which it is looking to raise up to Rs. 15,500 crore.
Till March, it proposes to sell shares in seven more companies. Unveiling the disinvestment calendar for the next six months, Bose said the public issue of Power Grid Corp. of India Ltd would follow CIL's initial public offering. It would be launched after Diwali.
Public issues of three more companies--Manganese Ore (India) Ltd, Shipping Corp. of India Ltd and Hindustan Copper Ltd (HCL)--are in the pipeline till December, he added.
The government has already begun the disinvestment process in these four companies, and has filed offer documents with capital market regulator Securities and Exchange Board of India. HCL's public issue is to be the last in the current quarter, and the government is planning to launch it in early December, according to Bose.
The forthcoming public issues of state-controlled companies are to be timed in a manner that will allow the issuers “to return the oversubscription to all investors before the next one is launched,“ he said. “From our meetings with different classes of investors, we have understood that liquidity wouldn't be a problem,“ Bose said.
IOC's public issue, under which the government is to sell 10% stake and the company is to issue new shares equivalent to 10% of its post-issue capital, could be the biggest till March. At current prices, the issue size could be around Rs. 20,000 crore.
That apart, the government is looking to divest a 5% stake in ONGC, and at current market prices, it could raise around Rs. 14,500 crore. In SAIL, too, it is planning to sell a 5% stake, while the company will issue as many new shares as the government sells. The issue size could be around Rs. 9,100 crore at current market prices.
Though analysts agree with Bose that liquidity wouldn't come in the way of the government's fulfilling its disinvestment target, participation of retail investors remains a potential problem.
“The key concern is that there may not be much retail participation,“ said S.P. Tulsian, a Mumbai-based equity analyst. “Even in Coal India's IPO, I don't expect employees to participate in a big way, which would send wrong signals to the market. Getting institutional investors to buy shares isn't the ideal thing to do for the government.“
Bose said the government would strive for “dispersed ownership“ of shares and would push for greater retail participation.
The rush of papers from state-owned companies would make India's secondary market “extremely vulnerable to foreign institutions,“ said Ajit Day, a Kolkata-based stock-broker and former president of the Calcutta Stock Exchange.
“I think the government should think how to create strength in the secondary market,“ Day said.
Some analysts such as Sarabjit Kaur Nangra of Angel Broking Ltd said the rush of papers from public sector companies could force some private issuers to delay capital raising plans.
“There would be some impact on private issuers, but it may not be significant,“ said Arvind Mahajan, executive director at consulting and audit firm KPMG. Bose said the government would make sure that private firms were not inconvenienced.
