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 at that time,” pointed out Jagannadham Thunuguntla, equity head, SMC Capital.
What’s more, for retail investors, disinvestment issues tend to be an attractive avenue for investing in equity markets as the government also gives about a 5 per cent discount to such investors.
“Most of PSU issues have a special discount as well as quota for both retail investors as well as employees’ of the firm. The idea is not only pure disinvestment but also to enhance public ownership of PSUs and encourage retail participation in equities,” said the disinvestment department official.
The Indian Express gives you a birds’ eye view of these firms to help you evaluate their attractiveness.
Rashtriya Chemicals and Fertilisers: As the name suggests is engaged in manufacturing and marketing of fertilisers and industrial chemicals, has one subsidiary, namely Rajasthan Rashtriya Chemicals and Fertilizers Ltd. and three joint ventures, with shareholding ranging between 33.3 per cent to 50 per cent. Government stake in the firm is currently at 92.5 per cent and a disinvestment of 12.5 per cent was recently approved by the Cabinet Committee on Economic Affairs.
Hindustan Copper Ltd:
The government has already divested 5.58 per cent to pare down its holding of 99.59 per cent in the state-owned miner. Another round of disinvestment through the offer for sale route is likely is the fourth quarter of the fiscal. India’s only vertically integrated copper producing company, the firm has a market capitalisation
MMTC Ltd: One of the country’s highest foreign exchange earners, the government plans to sell 9.33 per cent of its stake in the firm through the OFS route. Most clearances are in place for disinvestment in the metals and trading firm that has a market capitalisation of Rs 64,280 crore.
Neyveli Lignite Corporation: The coal ministry plans to sell 5 per cent stake in Chennai-based NLC, where it currently holds 93.56 per cent equity. Due to opposition from political parties and workers’ unions, NLC is the only navratna which does not comply with minimum float norms.
With lignite mining capacity of 30.5 million tonne per annum (mtpa) and plans to start excavation in three open-cast mines in Neyveli and Rajasthan soon, NLC has a market cap of Rs 13,732.05 crore.
State Trading Corporation: The Centre holds 91.02 per cent stake in the PSU that exports items ranging from rice and wheat to consumer durables. No disinvestment plans have been announced as yet for the firm although a decade ago the government was planning a strategic sale. At present, It has a market cap of Rs 1,353 crore.
National Fertilisers Ltd: A mini ratna PSU that is largely involved in urea production, the government holds 97.64 per cent equity in the firm. It has a turnover of over Rs 7,300 crore and an overall annual installed capacity of 32.31 lakh tonne of Urea. Its current market capitalisation is Rs 3,765.19 crore.
Fertilisers and Chemicals Travancore Ltd: Another PSU dealing under the ministry of chemicals and fertilisers, FACT has started reporting profits from 2010 again. The government currently holds 98.96 per cent stake in it.
A word of caution: Disinvestment issues have faced problems of pricing and valuation. Apart from fundamentals of the company, investors would be well advised to review the price band or floor price for such issues and compare valuations with peer companies before taking a final call.