Government gears up for second round of stake sale in state-run entities

NEW DELHI: The finance ministry is readying another round of stake sales in state-run firms after securing Cabinet nod for big-ticket issues such as of Coal India and Oil & Natural Gas Corp, which alone will likely help it meet the disinvestment target for this fiscal year.
One of the first companies listed for share sale in the second leg is Manganese Ore India, where the government plans to shed a 10% stake. Others on the list include NMDC, National Aluminium Co, National Buildings Construction Corp, Rashtriya Chemicals & Fertilizers, SJVN and Neyveli Lignite Corp.

The Centre holds 80% or more in these companies and must cut its stake within three years to meet a rule that makes at least 25% public holding compulsory for listed PSUs. Listed private firms already need to meet this condition.

“We will be soon moving for Cabinet approvals in these firms. The idea is we should be able to comply with Sebi norms in some firms by the end of this fiscal year,” said a senior government official, requesting anonymity.

There are 38 listed government firms where the public float is less than 25%. “We have time, but it is important to secure approvals so these issues can be planned accordingly,” said the official.
According to analysts, the move will give the government enough options to time issues. “If they have those approvals, they can pick and choose companies depending on market conditions,” said Jagannadham Thunuguntla, strategist and head of research at SMC Global Securities.

In fact, market conditions already look favourable, with the main stock indexes setting new records multiple times since the new government came to power this May. In the past couple of years, the government couldn’t meet its disinvestment targets, mostly because of weak markets that also led to shelving of some planned stake sales.

The government currently holds 80% of Manganese Ore India. It had raised Rs 618 crore from the company’s initial public offering in 2010-11. In power producer SJVN, government shareholding stands at 89.97%, of which 25% is with the Himachal Pradesh government.

The Centre had diluted 10% of stake in 2010-11 through an IPO, raising Rs 1,062 crore. Last week, the Cabinet Committee on Economic Affairs cleared proposals to sell stakes in three state-run firms including the bigbang offerings of Coal India and ONGC. The government intends to divest a 10% stake in Coal India and 5% in ONGC.

At current market prices, the government may be able to raise around Rs 40,000 crore through these two issues alone, close to its target to raise Rs 43,425 crore through disinvestment in state PSUs this fiscal year. The government currently holds a 68.94% stake in ONGC and 89.65% in Coal India. A proposal to sell 11.36% of power sector firm NHPC was also cleared by CCEA.

The first issue will be that of Steel Authority of India, where the plan to sell a 5% stake already has Cabinet approval and is expected to fetch the government around Rs 1,700 crore.