PSU disinvestment: Centre invites proposal to appoint General Advisers

Our Bureau New Delhi | Updated on October 24, 2019

Advisers will give suggestions for restructuring the govt’s stake in the five select PSUs

Moving ahead with its disinvestment exercise, the Department of Investment and Public Asset Management (DIPAM) in the Ministry of Finance has started the process to restructure government’s equity in five Central Public Sector Enterprises (CPSEs).

However, the Department has decided to keep the names of these companies confidential. It has invited proposal to appoint General Advisor for restructuring of government’s equity in these five CPSEs. which will help in efficiently managing the government’s investments in equity.

Restructuring of CPSEs requires detailed analysis keeping in view the corporate laws, SEBI regulations, sectoral policy, and international and domestic market conditions. Applicants for Advisor can obtain the list of these companies, but they will have to give an undertaking to keep the names confidential.

The equity restructuring exercise includes various method of disinvestment. One method is strategic disinvestment with transfer of management control in case of select CPSUs including subsidiaries, units and joint ventures, which are in ‘low priority’ sectors. Another method is minority stake sale without transfer of management control through various SEBI approved methods, are being followed in order to unlock the value, promote public ownership and higher degree of accountability.

Equity restructuring exercise is critical for the governemntas it has set a disinvestment target of ₹1.05 lakh crore. During the current financial year so far nearly ₹12,350 crore has been mopped up through disinvestment transactions and just five months are left to achieve the target.

Though, the Centre has prepared a list of companies and the Cabinet Committee on Economic Affairs (CCEA) has given its approval, it has not been able to fix a time-frame for selling stakes, thanks to the volatility in the stock markets.

The selected General Advisors will be required to prepare detailed report on each of the CPSU selected. They will have to take various factors in preparing the report which include industry analysis (comprising of country risk, economic cycle risk, technology risk, regulatory issues and analysis of the Five Forces - Competitive Rivalry, Supplier Power, Buyer Power, Threat of Substitution and Threat of New Entry).. The report will also have SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis, operational performance of last 5 years and analysis, employees’ profile analysis, comparison with the private sector beside other issues.

The report will have to give disinvestment consideration based on economic rationale, financial restructuring and corporate restructuring. It will have to suggest the proposed way-forward to maximise value of the Company/business segments. It will be required to give recommendations.

The General Advisors would be required to submit a detailed ‘plan of action’ within seven days. This will be evaluated by DIPAM and they may be required to make certain alterations and resubmit the Plan. These advisors will have to submit their final report on each company within one month from the date of their appointment.

Published on October 24, 2019

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