The government will review the fee structure for merchant bankers managing public issues of state-owned companies with a view to attract the best players in the industry.
“We are thinking of revisiting the fee structure of merchant bankers managing PSU public issues,” a senior official in the disinvestment department told PTI.
Domestic merchant bankers are reluctant to participate in government share sale programme since that offers them minimal fee and near-zero commissions.
This is in contrast to the initial years of government divestment programme in PSUs when bankers used to queue up to bid for the public issues.
“They cannot continue to manage PSU stake sales quoting such low fees for long. We have to review the structure to attract the best issue managers,” the official said.
To qualify for the management of such public issues, bankers have to give their bids to the government, following which the lowest bidder becomes the lead banker or book running lead manager (BRLM) for the issue and other qualified bankers follow the BRLM.
The commission received from the government is shared between them.
The government plans to raise Rs 40,000 crore through stake sale in PSUs in this fiscal. In 2010-11, the government raised Rs 22,763 crore by selling stake in six companies.
Earlier this year, the government tweaked norms for merchant bankers managing PSU share sales, saying that they should not be involved in managing issues of private sector companies, involved in the same business, to avoid the conflict of interest.
The government had to postpone disinvestment of SAIL last year, as the selected merchant bankers were also involved in the share-sale of Tata Steel, thereby, causing a “conflict of interest” between the two parties.
Merchant bankers complain they lose out on business opportunities in view of the restrictions imposed by the government in terms of prohibition from engaging in public issues of rival companies in private sector.
Public issues of several bluechip PSUs like SAIL and ONGC have been pending for long and bankers managing these share sales are losing out on opportunities in the private sector.
So far this current fiscal, the government has come out with only one public offering and raised Rs 1,143 crore. It is also planning to divest stake in ONGC, BHEL, SAIL, RINL, Hindustan Copper, Hindustan Aeronautics and NBCC among others.