Disinvestment through ‘offer-for-sale’ also in pipeline

SAIL may become the first public sector company to go for buy-back of shares during the current fiscal. Such a move will boost the company’s share price. The stock closed at Rs 78.95.

“Both the buy-back of shares and offer for sale are under consideration,” a highly placed Government official told Business Line.

Auction method

The company’s board is expected to take a final call on buy-back on Monday, which will allow the company to take back some of its stock from shareholders.

The existing norms prescribe extinguishing the bought shares. This will enhance the value of the remaining shares.

It will be interesting to see if both buy-back and offer-for-sale take place one after the other.

SAIL is one of the 11 public sector undertakings in which the Government has approved selling part of its stake. It is also among the seven companies where the Government has decided to use the route of ‘offer-for-sale through stock exchange’, better known as the auction method.

The plan is to execute the process next month.

On July 20 last year, the Cabinet Committee on Economic Affairs (CCEA) approved the disinvestment of 10.82 per cent equity of SAIL out of the Government shareholding of 85.82 per cent. After this disinvestment, the Government’s shareholding in the company would come down to 75 per cent.

Shareholders of SAIL, in its Annual General Meeting on September 21 last, gave their nod to a resolution on buy-back of shares. This move came after CCEA’s decision on March 1 last year, when it approved a proposal “to enable the Department of Disinvestment (DoD) to respond to normal practices in the corporate world if proposed by a Central Public Sector Undertakings (CPSE).”

This means the company will first have to approve the proposal of buying back its shares, after which the DoD will help it in doing so.

The proposal also mentioned that the DoD might be enabled to tender or offer equity on behalf of the Government if a CPSE decides to buy back its own shares, using surplus cash to be provided for sustained investor interest in the company and protecting its market capitalisation.

Meanwhile, the roadshow for ‘offer-for-sale’ related to SAIL is likely to kick-start soon.

The Government is estimated to mobilise Rs 27,000 crore against the budgeted target of Rs 30,000 crore through this disinvestment this fiscal.


(This article was published on February 20, 2013)
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