Look for discounts as cos rush for stake sale

Jan 07 2013, 08:30 IST
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SummaryThe next few months could be a good time to buy shares as state-owned firms are likely to go for public offers to meet Sebi’s minimum public float norms by August

The first half of the New Year 2013 could see a spate of public offers by state-owned firms as they scramble to meet market regulator Securities and Exchange Board of India’s norms on minimum public shareholding.

The guidelines, announced in late 2010, stipulate that all listed public sector units (PSUs) must have a minimum public float of 10 per cent by August 2013. For listed private companies, the market regulator had laid a minimum shareholding of 25 per cent which must be met by April this year.

Though firms have lobbied hard for an extension of the deadline, Sebi chief UK Sinha has ruled it out on the grounds that they had been given sufficient time to comply. “16 PSUs (which don’t have 25 per cent public holding) will have to mobilise Rs 12,000 crore to adhere to the new public float norms,” he had said last year.

What is expected to aid these issues further is the bull run in the markets this year. Already, the Bombay Stock Exchange Sensex and the Nifty have touched two year peaks following the US fiscal cliff deal.

“In 2013, we expect government to push reforms and possible turn of interest rate cycle. With Sensex riding all-time high there will be at least 10 to 15 per cent premium assigned to liquidity hence our Sensex target comes to 24,000,” said Kishor P Ostwal, CMD, CNI Research.

Though some of the 15 PSUs are loss-making enterprises such as Andrew Yule, Scooters India and HMT, finance ministry officials said that 2013 will be dominated by PSU issues that focus more on meeting the shareholding norms than just on pure disinvestment.

“We are working on a number of proposals for disinvestment to enable PSUs to increase their public float,” said a disinvestment department official.

One such proposal, of disinvestment in Rashtriya Chemicals Ltd was cleared by the Cabinet last month. The issue is slated to be held in early 2013-14.

For retail investors, the quandary is if such public sector share sales, largely driven by the need for regulatory compliance, are a good idea. Analysts generally believe that PSUs are stable, long-term stocks that give good returns. Further, many of these trade at attractive rates and could prove to be a healthy addition to your portfolio.

“Whenever there is an offer for sale, it tends to have a good discount than the open market price and investors should ideally go in for buying shares

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