The finance ministry has decided to opt for the offer for sale (OFS) route to sell its stakes in all eleven public sector units and private firm Hindustan Zinc in the line-up for disinvestment in FY15. Sources told FE that the OFS route has been chosen because it is a faster process than follow-on public offers (FPO).
The department of disinvestment (DoD) reckons that while the FPO route takes about 3-4 months for all regulatory clearances, the OFS route is often completed within 15 days to a month.
The FY15 budgeted target from disinvestment is R58,425 crore, out of which R43,425 crore is expected from stake sales in 11 PSUs, including ONGC, Coal India, NHPC, SAIL and Concor, while R15,000 is expected from the sale of Centre’s residual stake in Hindustan Zinc and Balco. As reported by FE earlier, these estimates are rather conservative and the government’s own internal estimates show the Budget target could be outstripped by as much as R13,000-15,000 crore in case of PSU stake sales alone.
The OFS route has proved to be popular with investors. As shares can be divested on the stock exchange platform during market hours. It has been a hit with companies wanting to cut their stake in order to comply with market regulator Sebi’s minimum shareholding norms. However its one drawback is that the quota for retail investors, which at 10% is less than that of the FPO route at 35%.
A ministry official said that the Centre was in talks with Sebi to hike the retail investor limit for the OFS route. “To make the stake sales more attractive to retail investors, we are seeking to either increase the quota or provide them shares at a discount. The Sebi is likely to take a decision by the end of this month,” the official said, adding the decision on best way to divest 49% stake in Balco, which is unlisted, will also be taken soon.