Centre plans to dilute 10% stake in Engineers India

Shishir Sinha New Delhi | Updated on April 15, 2013 Published on April 15, 2013

1st follow-on public issue from Govt to hit market after 2 years

Engineers India may become the first company to be divested through follow-on public offer (FPO) after a gap of almost two years. In the FPO, while a minimum 35 per cent of the total offer will be reserved for retail investors, there is also a possibility of getting shares at a price lower than high net worth individuals or institutional investors.

The stock gained 2.26 per cent to close at Rs 156.10 on the BSE on Monday.

The Government intends to shed 10 per cent of its total shareholding of 80.4 per cent in Engineers India.

This will be the second FPO of the company. In this regard, it has invited proposals for engagement of book-running lead managers. It has also mentioned that 5 per cent of the offer will be reserved for the employees. However, it is yet to decide the date of FPO.

The last FPO was that of Power Finance which hit the market in May 2011. Although there was a small IPO (of NBCC) for disinvestment after that, till now the retail investor has got little chance to participate in the disinvestment programme.

Apart from Engineers India, Rashtriya Ispat Nigam Ltd and Hindustan Aeronautics are the other approved cases where divestment will not be through OFS (offer for sale). The reason is that OFS is possible only for select listed companies and both Rashtriya Ispat and Hindustan Aeronautics are not listed. Hence, there will be IPOs for these two companies.

According to the Securities and Exchange Board India’s norms, an individual investing up to Rs 2 lakh in an IPO or FPO is considered a retail investor.

Prithvi Haldea, Managing Director of Prime (the agency that tracks the primary market), however, does not favour FPOs, as the issue price under it is sometime higher than the market price, which discourages the retail investor to participate.

“It would be better if there is separate window for retail investors under OFS, offering a fixed number of shares at discount on floor price a day after bidding by institutional investors,” he said.

Published on April 15, 2013
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