Centre Sets Mop-Up Target Of Rs 16,000 Cr
New Delhi: Steelmaker SAIL is likely to be the first public sector undertaking to tap the capital market in 2010-11 after the government on Thursday cleared a proposal for disinvesting 10% of its share in the company which will simultaneously issue an equivalent fresh equity to mobilise an aggregate of Rs 16,000 crore in two tranches.
As part of the proposal approved by the Cabinet Committee on Economic Affairs (CCEA), SAIL will raise an additional 10% of the paid-up equity and the government, on its part, will disinvest 10% of its holding. "This will be done in two tranches. In each tranche, there will a 5% FPO (follow-on public offer) and 5% sale of government equity,'' home minister P Chidambaram told reporters after the CCEA meeting.
At present price levels, it is expected that SAIL will get an additional capital of Rs 8,000 crore, while the government will also get Rs 8,000 crore. SAIL shares dropped 7% on Thursday to close at Rs 237. The government has set a target of raising Rs 40,000 crore this fiscal by disinvesting its equity in leading state-run companies.
"The net result will be, after both tranches are completed, the government's shareholding will be approximately 69%. Public shareholding will be 31%,'' Chidambaram said. As of now, public holding in the company stands at 14.2%. The proceeds from fresh issues of equity by SAIL will help in filling the resource gap for funding the steel Navratna's capital expenditure emerging from increased pressure on steel prices and diminished margins.
SAIL has undertaken a Rs 70,000-crore expansion programme to raise its installed capacity from 13.82 million tonne per annum (MTPA) to 23.46 million tonne a year. The SAIL disinvestment is in line with the policy sharing ownership of Central public sector enterprises with the public, while also raising the funds to finance its different social programmes.
In the last fiscal, the government had divested stake in REC, NMDC and NTPC, amid tepid response from public investors. The government had set a target of raising about Rs 40,000 crore this fiscal through disinvestment, while last year, it was Rs 25,000 crore. Other PSUs like Coal India, MMTC and EIL are also expected to follow suit.
Strike When Iron Is Hot
t SAIL will raise an additional 10% of the paid-up equity and the govt will disinvest 10% of its holding
t The disinvestment will be done in two tranches. In each tranche, there will a 5% FPO and 5% sale of govt equity
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