Cabinet panel decides to achieve target via stock exchange or auction method

The SAIL Chairman, Mr C.S. Verma, hopes the rise in steel demand and the stable price will help the Government in its disinvestment programme.

On Thursday, the Cabinet Committee on Economic Affairs (CCEA) decided to disinvest in SAIL via an offer-of-sale through stock exchange or auction method. Earlier plans at divestment were postponed on the plea of unfavourable stock market conditions.

Mr Verma told Business Line: “According to the World Steel Association (WSA), the demand for steel in India has grown 8.8 per cent during the first quarter of 2012-13, while it was 5.5 per cent for the entire 2011-12. At the same time, with massive investment in infrastructure for the Twelfth Plan, we expect demand to grow substantially.”

No issues on fund front

He also said the company has spent Rs 38,000 crore on its modernisation programme and order for Rs 55,000 crore has already been given. The company will have no problem meeting its fund requirement, he claimed.

Current net worth of the company is around Rs 39,000 crore. “If we talk about debt-equity ratio of 2:1, this is enough to help us in borrowing Rs 78,000 crore,” Mr Verma added. Also, the company has around Rs 20,000 crore in bank deposits.

This point is significant as the earlier plan was to issue fresh equity for mobilising funds along with disinvestment. Now, there will be no fresh issue of equity.

SAIL will be the second government-owned and fourth company overall where this method will be used. Although some questions were raised after the ONGC issue on the method, the Government is confident there will be no problem this time as the market regulator SEBI has made some changes.

The CCEA approved disinvestment of 10.82 per cent of the 85.82 per cent the government holds in SAIL. After this disinvestment, the Government’s shareholding in the company will come down to 75 per cent. There is no clarity on whether the entire portion will be offloaded at one go or in two tranches

shishir.s@thehindu.co.in

(This article was published on July 20, 2012)
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