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Curbing volatility in stock prices: Directive to check PSU sell-off leaks

Our Bureau

New Delhi , July 31

THIS could explain why the "talkative and transparent" Disinvestment Ministry has suddenly retreated into a shell.

The Cabinet Secretariat has directed Ministries and PSUs not to reveal information that may prove to be price-sensitive to the PSU shares being put up for sale by the Union Government.

The informal sharing of information relating to specific cases of PSUs being privatised with the media and representatives of the bidders would trigger sharp volatility in the stock prices creating an impact on the disinvestment process.

"Not only is this practice unethical and undesirable, the listing agreements with different stock exchanges categorically require that the company immediately informs the stock exchange of all events that are likely to have a bearing on the performance and operations of the company as also regarding the price sensitive information," Mr R. Poornalingam, Additional Secretary, Cabinet Secretariat, warned in a letter sent to various Ministries in the Government concerned with the PSU disinvestment programme.

Referring to the statements made by the Chairman and Managing Directors' of PSUs and leaking of information by unauthorised personnel even before informing the stock exchanges, Mr Poornalingam said that any breach of this practice will be viewed adversely by the Government.

The Cabinet Secretariat has also directed the Ministries concerned to issue instructions to all officials and PSUs and Government departments under their administrative control to ensure that statements or announcements to the media are made only by the authorised personnel and after ensuring that stock exchanges are fully informed regarding all price sensitive information well in advance.

The Cabinet Secretariat's move to gag Ministries and PSUs from divulging information on the disinvestment process comes in the wake of reports that information leaks relating to disinvestment programme of big PSUs such as Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd had fuelled a spurt in their stock market prices.

"There have been instances where statements made by unauthorised personnel to the media have resulted in erratic and volatile price movement of the scrips. It has come to the knowledge of the Government that in a particular instance, the statement made by a chief executive of the PSU to the media resulted in extreme volatility of the scrip," Mr Poornalingam said.

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