The disinvestment target of Rs 30,000 crore through stake sale in PSUs by the Union Government is achievable, according to a top investment banker. But the Government must listen carefully to the investor feedback and then decide on pricing, he said.
The Department of Disinvestment (DoD) has obtained approval of the Cabinet for disinvestment in Hindustan Copper Ltd, Nalco, SAIL, RINL, BHEL, Oil India, MMTC and NMDC.
Speaking to Business Line, Mr S. Ramesh, Joint MD and Member of Board, Kotak Investment Banking, said he believed the target was “achievable”, given a few caveats.
“Most companies chosen by Government over time for disinvestment have been profitable companies with good track record in the monopoly, duopoly space. The only issue is how to get the pricing right.”
Mr Ramesh is optimistic and thinks that getting two to three such disinvestments right could help propel the broader primary markets. He says the Offer for Sale route is a good option.
Describing his prescription to make the PSU stake sale show a success, Mr Ramesh said: “The Government needs to view it as a programme as opposed to an issuance of one kind. “Secondly, they must look at which companies are ready to go to the investors as apart from the current profitability, the outlook for the next 3 to 4 quarters is also important.
Investor has edge
“Thirdly, they must try and match the business cycle of the company’s product with the timing of the issuance. However, the whole crux lies in the pricing which means, the Government not only has to get the road shows right, but also listen to the investor feedback. Investors are not going to give a consistent feedback for all the companies as they will be more cautious so it’s important for the government to listen and then decide the pricing.”
“In the investor versus issuer equation, the scales are tilted now in favour of investors who are calling the shots. So, if it means the issuer is not getting the full price they want, it is a reality that has to be accepted,” he added.