HMT, Neyveli Lignite and RCF likely to be early candidates

Weak market conditions might not deter the Union Government from offloading its stakes in public sector undertakings. While divestment proceeds are required to bridge the deficit gap, stakes in some PSUs need to be shed to meet the minimum public shareholding requirement stipulated by SEBI.

June deadline

HMT, Neyveli Lignite and Rashtriya Chemicals and Fertilisers (RCF) should be at the front of the queue for divestment in 2013-14, with the Government’s stake at present above the ceiling prescribed by the stock market regulator.

This is the last year for these companies to converge with the norm for 10 per cent public shareholding in PSUs, for which the a three-year timeframe was set in 2010, ending June 2013.

At present, the Government has a 98.88 per cent in HMT, while its holdings in Neyveli Lignite and RCF are closer to the threshold limit, at 93.56 per cent and 92.5 per cent, respectively. The rationale behind ensuring a minimum public shareholding in a company is to ensure that there is sufficient liquidity on these counters, thus resulting in a more efficient price discovery.

Govt sees it differently

But it would appear that a different set of companies top the Centre’s immediate priorities for disinvestment in the coming months. According to the Department of Disinvestment Web site, Steel Authority of India, Rashtriya Ispat Nigam, Bharat Heavy Electricals and the sick Tyre Corporation of India are the prime contenders for divestment as of now.

While RINL’s much-delayed IPO is expected to raise Rs 2,500 crore, the BHEL sell-off will garner about Rs 4,000 crore from 5 per cent divestment. The plan to divest 12.15 per cent in Nalco could mop up Rs 1,400 crore, while 10 per cent EIL divestment would raise Rs 800 crore.

SAIL’s big-ticket FPO (follow-on public offer) is already on the cards and a one-day share sale could take place as early as March 20. The Centre is expected to divest 10.82 per cent in the steel major, bringing down its stake to 75 per cent. It is expected to rake in Rs 3,500 crore.

Another offer slated for this month is 9.33 per cent divestment in trading giant MMTC for around Rs 7,000 crore. This will bring down the Government’s shareholding to 90 per cent.

But if the SAIL and MMTC FPOs take place before the end of the 2012-13 financial year, this will ensure that the Centre is able to meet the original 2012-13 Budget Estimate for a mop-up of Rs 30,000 crore through disinvestment, which was revised downward to Rs 24,000 crore.

(This article was published on March 5, 2013)
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