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Weak markets not to hit RINL IPO plan

Santosh Tiwari / New Delhi 14 May 12 | 12:35 AM

Undeterred by the poor response to recent share offer issues and a continued sluggish market, the government is going ahead with plans to begin disinvestment in the current financial year with the initial public offering (IPO) of Rashtriya Ispat Nigam Ltd (RINL).

Disinvestment Secretary Mohammad Haleem Khan told Business Standard: “We are going ahead with the original plan of bringing the RINL IPO." The premise is that market conditions don’t affect IPOs much if the price is reasonable.

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The filing of prospectus with the Securities and Exchange Board of India (Sebi) for the public offer of ten per cent paid-up equity of the government is set to be completed by the end of next week.

From the plan of the Department of Disinvestment (DoD), an auction route would be preferred over follow-on public offers (FPOs).

“Bringing in new shareholders when old shareholders are witnessing erosion of their wealth is not a good idea," said a senior DoD official on why FPOs would be avoided in the current situation.

He added Sebi and the Department of Economic Affairs were looking at the auction process and DoD was expecting to be able to conduct the next auction as quickly as possible.

Apart from RINL, other government-run companies readied for disinvestment in 2012-13 (this year’s divestment target is Rs 30,000 crore) include Hindustan Copper, Steel Authority of India, Bharat Heavy Electricals Limited and Oil India.

An empowered group of ministers has already discussed the government’s stake sale through auction in Oil India and BHEL.

Another mode for disinvestment being seriously considered was of an exchange-traded fund (ETF), said the official, adding the department was hoping to soon put up a concrete proposal in this regard before Finance Minister Pranab Mukherjee.

The proposed mechanism would allow the government to pool the shares of different companies it wants to disinvest to create a fund. This will then be sliced into smaller units.

The units will then be listed on stock exchanges.

The advantages include a larger retail participation and a check on volatility in public sector companies’ shares.

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