Within 24 hours of claiming to have to put the public sector undertakings share sell-off process on fast track, the Union Government’s planned disinvestment in Rashtriya Ispat Nigam Limited (RINL) has been deferred. This is the third deferment of the proposed divestment in the Visakhapatnam-based steel-maker. The issue was to hit the market on October 16.
Poor market condition
However, the reason for deferment this time is different. A top official source told Business Line, “There are differences over the issue price. The merchant bankers suggested a price below Rs 20 while the book value of the company is Rs 22.50. This was not acceptable to the Steel Ministry and, finally, a call has been taken to defer the issue.” On two earlier occasions, poor market conditions forced the Government to defer the share-sale plan.
Differences over the issue price also led to the cancellation of a meeting of an Empowered Group of Ministers (EGoM) on Tuesday. This meeting was called to fix the price band for the issue. There is no clarity when jinx will be broken and the issue hit the market. “We have to start almost from zero,” the source admitted.
Company officials said that when the market is in buoyant mood, selling shares at less than book value did not make a sense. Secondly, the company is not just making good profit but also has really sound fundamentals. All these make the value attractive, but the so called ‘aggressive pricing’ is giving a different story, they said.
The Government, however, said in a statement: “It remains committed to the disinvestment programme and will evaluate the decision in due course keeping in view all relevant factors.”
After FM’s speech
The development came about a day after Finance Minister P Chidambaram said the Centre has lined up all the disinvestment cases for the next six months.
The first case (RINL) “is coming up some time this month,” he had said. RINL filed the draft document on May 18 to offload 10 per cent of government’s holding. This sell-off is expected to raise approximately Rs 2,500 crore.
RINL is among the seven companies in which the Cabinet Committee on Economic Affairs approved disinvestment. The Department of Disinvestment has also moved a note for inter-ministerial consultations to divest a part of its shareholdings in four more Central Public Sector Undertakings.
The Union Government hopes to mop up Rs 30,000 crore through disinvestment this year. The first half is past but it has yet to open account. During the first three months (April-June) of the current fiscal, RINL clocked a turnover of Rs 3,000 crore and a net profit of around Rs 750 crore.