Anxious to give disinvestment process the much-needed momentum, the Centre on Tuesday announced sale of up to 9% stake (558.66 million shares) in Coal India (CIL). At the floor price of Rs 266 apiece, the exercise could fetch the government up to Rs 14,860 crore.
According to stock exchange filing by the coal miner, the offer for sale (OFS) will have a base offer size of 3% equity stake; there will be an additional offer of 6% stake in case of over-subscription (greenshoe option). The two-day OFS will open for institutional bidders on Wednesday while retail investors will bid on Thursday.
The floor price involves a discount of 3.6% on CIL’s closing price of Rs 275.9 on the BSE on Tuesday. Retail investors will get an additional discount of 5%.
So far, in the current fiscal year, the disinvestment receipts have remained just 12.5% of budget estimate at Rs 10,029 crore. This makes it incumbent on the government to carry out at least few PSU stake sales by December-end.
Big-ticket ‘strategic sales’, similar to the ONGC-HPCL deal last year, however, may not materialise soon; FE has learnt that administrative ministries like petroleum, power, etc, haven’t yet submitted any proposal in this regard.
Recently, the department of investment and public asset management (DIPAM) held roadshows in the US, the UK, Hong Kong and Singapore for CIL to gauge investor appetite. The government’s decision to go ahead with the CIL OFS at a floor price which is nearly 15.8% lower than the 52-week high price of `316/share, indicates that the government wants to tap market during small windows of stability in the stock market to boost revenues.
After a recent meeting with Prime Minister Narendra Modi on the economy and the progress in implementation of the central budget, finance minister Arun Jaitley had said that the government was confident of exceeding the disinvestment target in FY19 like it did in FY18.
Last year, the Centre was in a comfortable position on the disinvestment front by this time of the year. By October 2017, it was assured of receipts of Rs 67,000 crore — including Rs 36,915 crore from ONGC, which agreed to buy the government’s 51% stake in HPCL. The Centre ended up collecting the largest-ever disinvestment revenue of Rs 1 lakh crore in FY18, against a target of Rs 72,500 crore.
The Centre is also banking on buy-backs in over a dozen PSUs such as ONGC, NTPC and NMDC, a further fund offer under the existing CPSE-ETF, monetisation of a portion of SUUTI holdings in Axis Bank and ITC, and strategic sales of some relatively smaller companies.
Even though the Centre has also lined up OFSs in about a dozen other PSUs, including Hudco, NBCC and Bharat Electronics, market conditions would determine if these would actually go through.