With its share price touching a 52-week low, the Government has halved the number of shares of Steel Authority of India (SAIL) to be divested in the current fiscal. According to Steel Ministry’s communication to stock exchanges, the Government proposes to sell 5.82 per cent of its total stake. Earlier the Cabinet Committee on Economic Affairs, in its meeting last July, decided to divest Government’s equity of 10.82 per cent.
However, Wednesday’s communication ruled out the green shoe option but did not mention when the sale of remaining approved portion will take place. The stake-sale will take place on Friday. This will be the last public sector undertaking to be divested in the current fiscal.
SAIL’s share, after touching a low of Rs 64.05 during intra-day trading on Wednesday, closed at Rs 65.05, which is 0.6 per cent lower than Tuesday’s closing.
Floor price today
An Empowered Group of Ministers approved the process and price on Wednesday. However, the floor price for sale is to be announced on Thursday. The Government is expected to get Rs 1,500 crore though its stake sale in the company.
The sale will take place through ‘offer-for-sale’ through stock exchanges. Under this method, any individual or institutional investor can bid on or above the floor price. The bidding process takes place during market hours and shares are allocated on price priority basis — meaning higher the bid price, higher the chance of getting shares. The time to complete the entire process could be as little as one week.
The Department of Disinvestment had already held road shows in Singapore, Hong Kong, the US, the UK and continental Europe for the proposed disinvestment. The merchant bankers for SAIL share-sale include SBI Caps, Kotak Mahindra and Deutsche Bank. Post sale, the Government’s holding in SAIL would come down to 80 per cent.
For the third quarter ended December 31, 2012, SAIL reported a 23-per cent decline in net profit at Rs 484 crore from the year ago period, mainly due to lower net sales realisation amid subdued market conditions.
The Government has so far collected Rs 22,400 crore through disinvestment in various companies including Hindustan Copper, NMDC, NTPC, OIL India and Nalco. Although the original target for disinvestment was Rs 30,000 crore, it was later revised to Rs 24,000 crore.