Govt likely to clear new routes for PSU disinvestment
Buyback proposal to be place before cabinet committee on economic affairs
PTI | New Delhi | January 04 2012
The government is likely to give green signal to the proposal of the disinvestment department to help it raise Rs 40,000 crore through innovative means like buyback and cross-holding of equities in CPSEs.
"The buyback proposals would be placed before the cabinet committee on economic affairs (CCEA) for appropriate decision," sources said.
In a related development, the Sebi Board, which met in Mumbai, has relaxed the norms for buyback of shares and dilution of equity by companies. It would help the companies to complete the process of selling shares within days, as against the normal process which can take months.
The CCEA would also consider the possibility of LIC, PSU banks or entities to buy government stake in central public sector enterprises (CPSEs).
Among other things, the disinvestment department has also suggested promoting cross-holding of equities between CPSEs, which would help the government raise money without diluting its holding in such PSUs.
The department of disinvestment (DoD) has already sought the opinion of concerned ministries for buyback of shares and is believed to have identified about two dozen cash rich PSUs, with a total balance of nearly Rs 2 lakh crore.
The companies which have been identified by the government for stake sale include SAIL, NMDC, ONGC, NTPC, Coal India, Oil India, MMTC, Neyveli Lignite, NHPC, BHEL and GAIL.
The government has been thinking of raising funds through the buyback route, as it has not been able to raise money through sale of equity in public sector units on account of uncertainty in stock markets.
Under the buyback mode, the government can raise money by selling its equity in the company to the PSU itself.
The Sebi Board has introduced a new mechanism called institutional placement programme (IPP) and offer for sale of shares through stock exchanges to expedite the process of share sale.
Under the IPP mechanism, a promoter would be able to dilute its equity in the company quickly.
As part of the offer for sale scheme, Sebi said, the stock exchanges would provide special window for share sale, along with the normal trade.
"Only the promoter/promoter group of companies which are active/eligible for trading would be permitted to offer their shares for sale," Sebi said after the board meeting.
With regard to buyback, the regulator said, "The timeline for various activities involved in the buyback process have been revised which shall result in substantial reduction of time taken for completion of buyback."
The centre has set a target for raising Rs 40,000 crore through disinvestment this fiscal. But with nine months already over, it has been able to mop up only Rs 1,145 crore through the follow-up offer of Power Finance Corporation.
Given the volatility in the capital market in the backdrop of global and domestic economic situation, the government has not come out with any public offer to sell its stake in PSUs, barring PFC, this fiscal.


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