New Delhi: The government will consider disinvesting its stakes in profitable listed public sector units when these come out with follow-on offers.
"The government would consider sale of a part of its shareholding by riding piggyback (on) the follow-on public offerings," said a note prepared by the Finance Ministry on the occasion of Economic Editors' Conference.
The government would sell directly its stake in NTPC
without issuance of any fresh equity.
In case of the other two state-run firms, Satluj Jal
Vidyut Nigam Ltd and Rural Electrification Corporation whose
disinvestment has been approved, there would be a mix of fresh
equity and direct government stake sale.
There was a mix of direct disinvestment as well as fresh
equity in the case of NHPC and Oil India that were listed
recently.
The note said the government would focus first on these
listed profitable public sector companies where less than 10
per cent stake is held by the public.
It said the government can go in for either fresh equity
or direct stake sale, or both, in the IPOs.
The note said the National Investment Fund, which gets
proceeds of disinvestments, has earned less returns on
investments than the minimum required in the first two years.
"Average income (of NIF) for first year was 8.47 per
cent. Average income of second year was 10.02 per cent. Thus,
the average income was 9.245 per cent against the hurdle rate
of 9.25 per cent,"
Hurdle rate is the required rate of return above which an
investment makes sense and below that it does not.
The norms for NIF says "The Fund will be professionally
managed to provide sustainable returns to the government
without depleting the corpus. Selected public sector mutual
funds will be entrusted with the management of the corpus of
the Fund."
At present asset management companies of UTI MF, SBI,
and LIC manage the funds of the NIF.
The NIF has a corpus of Rs 1,814.45 crore, collected from
the proceeds of disinvestment in the Power Grid Corporation
and the Rural Electrification Corporation.
It was created in 2005 to channelise realisation from
sale of minority shareholding of the government in profitable
public sector companies.
The income of the fund is used for investment in social
sector projects, capital investment in selected profitable and
revivable PSUs that yield adequate returns to enlarge their
capital base.
Bureau Report