Centre looks to score an early goal on public float norms

Illustration: Ajay Mohanty

Despite extending the 25 per cent minimum public shareholding (MPS) deadline by another year, the government has not taken eyes off the goal.

In recent weeks, the Centre has looked to dilute excess stake in two public sector undertakings (PSUs)-National Fertilizer (NFL) and Hindustan Copper (HCL). Investment banking sources say the government has identified another half a dozen companies where it plans to dilute in the near term.

NLC India, SJVN and Scooters India are among the companies where the Centre would try to increase the public float in the next few weeks, sources said.

"The extension in the MPS deadline was mainly for loss-making companies and some other entities where there are challenges. The government has assured Sebi (the markets regulator) that it will push ahead with compliance in as many PSUs as it can much before the new deadline," said a person with knowledge of the development.

As of June, there were 18 PSUs with government holding of more than 75 per cent.

"There are at least 10 PSUs whose balance sheets are not strong and there is no traction in their stocks. There will be some restructuring in these. In the rest of the big names, the government might not have any difficulty in finding buyers," said an investment banker.

Illustration: ajay mohanty

In end-July, the government sold five per cent stake in NFL for Rs 200 crore, to bring down its holding from 80 per cent to 75 per cent. Similarly, it sold 6.83 per cent stake in HCL for Rs 400 crore to bring down its stake to 76 per cent. While the government had originally envisaged to sell eight per cent stake in HCL, less than expected demand meant it had to settle for lower dilution.

Under the MPS norms, promoters can hold a maximum of 75 per cent in a listed company. The deadline for private sector entities ended in June 2014. PSUs were given time till August 2017. Last month, the Centre extended the deadline to August 2018.

Given the buoyancy in the market, investment bankers say it is an appropriate time for the government to dilute its holding. "The markets are trading near life-time highs. There is enough liquidity in the system and investors are also bullish on PSU stocks, due to the returns they gave in recent times," said Narayanan Sadanandan, executive vice-president, SBI Capital Markets.

Investment bankers expect lot of action in PSU stake sales in the next few months as the government tries to meet its ambitious divestment target of Rs 72,500 crore for the financial year. Of this, government has so far managed Rs 8,427 crore.

Among the big PSUs, the government needs to at least divest 3.8 per cent stake in Coal India. According to bankers, a part of the dilution will be taken care by the upcoming PSU exchange traded fund, Bharat-22. Dilution in PSU lenders Indian Bank and Central Bank is expected to take place, as they are considering raising fresh capital from institutional investors.

 


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