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Divestment of Government stake in State-owned entities may get hastened with an empowered group of ministers (EGoM) on Wednesday giving its nod for adopting the auction method for such stake sale. The auction method is being seen as practical as it involves less paperwork and transactions could be completed quickly.
The auction method may be used for all those cases where the cabinet committee on economic affairs CCEA has given its nod for a follow-on-public offering, a ministerial panel decided today. Simply put, the Government can now auction a part of its holding through offer of sale of shares route in a separate window provided by the stock exchanges.
The capital market regulator SEBI had on February 1 issued detailed guidelines for the offer of sale of shares by promoters through the stock exchange mechanism.
The offer for sale route is available to promoters/promoter group entities of such companies that are required to increase public shareholding to meet the minimum public shareholding requirements under the Securities Contracts (regulation) rules. It is also available to promoters/promoter group entities of top 100 companies based on average market capitalisation of last completed quarter.
With today's EGoM decision, the Centre can look at offloading stake in companies such as ONGC, BHEL, SAIL (at an appropriate time) through the auction method. Under the auction method, the promoter/seller will decide on a floor price, but may opt not to publicly disclose it. In cases where no public disclosure is made, the floor price is disseminated to the market after the closure of the offer for sale.
If the timeline for the offer of sale is decided, then it could be a breeze for the Government to complete the transaction as SEBI guidelines stipulate that the duration of the offer should not exceed one trading day.
The Disinvestment Secretary, Mr Mohammad Haleem Khan, said that no further nod of Cabinet is required for the Centre to pursue the auction method as this was a decision of the EGoM.
“The EGoM has taken a decision to exercise the option to go in for new guidelines of the SEBI—both in respect of ONGC and BHEL. We have decided to go in for auctions. Both ONGC and BHEL are under consideration. As for further decisions, EGoM is going to meet shortly again. For all other decisions, next meeting of EGoM has to be awaited,” Mr Jaipal Reddy, Union Petroleum Minister, said.
While ONGC offer for sale transaction may happen this fiscal, indications are that the BHEL transaction may not be put through this before end March. For both ONGC and BHEL, the Government is looking to shed 5 per cent stake.
Heavy Industries Minister, Mr Praful Patel said that the EGoM had not taken any specific decision with regard to BHEL.
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