SAIL divestment issue opens today; floor price set at ₹83/share

One can bid for a share of Steel Authority of India Ltd (SAIL) at ₹83 or above under the government’s disinvestment programme. The bids can be placed on Friday.

The floor price announced by the government after market closing hours is 2.75 per cent lower than Thursday’s closing price of ₹85.35.

1st issue under auction At this price, the Government can get little over ₹1,700 crore. However, this can go up, if the allocation price is higher than the floor price. Floor price means the price below which no investor is allowed to bid for.

A reworked offer-for-sale mechanism through stock exchanges (better known as the auction method) is being used for the first time in this disinvestment programme. Under this, a retail investor will have a reservation of 10 per cent and a discount of 5 per cent. Similarly, based on the bids, there will be two price cut-offs, one for the retail and another for the non-retail category (i.e. high net worth individual and institutional investor). A retail investor is an individual who places bids for shares of total value of not more than ₹2 lakh.

The Centre aims to sell over 20.65 crore shares, which is 5 per cent of its total holding in the steelmaker. The previous UPA Government had in July 2012 approved a 10.82 per cent stake-sale in SAIL. Accordingly, the first tranche of disinvestment of 5.82 per cent was completed in March 2013. After the current round of disinvestment, the government’s holding will come down to 75 per cent.

Norm-compliant With this, SAIL will comply with market regulator SEBI’s norm of minimum public shareholding of 25 per cent. SEBI had, on June 19, announced that all the listed public sector enterprises will have to achieve 25 per cent minimum public shareholding within three years. Public shareholding means shares held by investors other than promoters.

The SAIL offering would be the first PSU share sale under the new Government, which targets to raise ₹43,425 crore through share sales in various state-owned firms during this fiscal.

The Centre also aims to get ₹15,000 crore through residual stake sale in non-government companies, such as Balco and Hindustan Zinc.

Currently, the company has over 3.88 lakh shareholders comprising 3.80 lakh small shareholders holding nominal share capital up to ₹1 lakh. With reservation and discount, the number of small shareholders is expected to rise.