“The share sales could be through direct sale of government stake, an issue of fresh stock or a combination of both,” said J. Thunuguntia, equity head at SMC Capital.

1. New rule to spur PSU selloffs
JAYANTA ROY CHOWDHURY
New Delhi, June 6: The government can rake in at least Rs 1,24,000 crore from
divestment over the next five years on account of the new norms for public holding
in listed companies, according to merchant bankers.
It is now mandatory for all listed companies — PSUs as well as private — to
maintain a minimum public holding of 25 per cent. Companies can reach the
threshold limit by selling at least 5 per cent stake every year. Top officials said
stake sales in PSUs would get a fillip under the new norms.
Based on current market valuations, merchant bankers said the share sale in state-run entities was estimated at Rs
44,000 crore for the current year against the government’s divestment target of Rs 40,000 crore.
The rule tweak will see more PSUs than private companies flooding the market with offers. “One can say that the
rules were tailor-made to help the government to bring PSUs to the market,” said finance ministry officials.
“The share sales could be through direct sale of government stake, an issue of fresh stock or a combination of both,”
said J. Thunuguntia, equity head at SMC Capital.
Most public flotations by PSUs offered an equal numbers of government shares and fresh stock for sale.
Over the next five years, the department of divestment will have to prod around 35 state-run companies, from blue-
chips such as NTPC, SAIL and MMTC to sick firms such as Scooter India to hit the market.
According to the bankers, listings are expected to fetch at least Rs 37,000 crore in the second year, Rs 22,000 crore
in the third, Rs 12,000 crore in the fourth and Rs 9,000 crore in the fifth year.
With the rise in the sensex, the actual amount garnered could be more than two-and-a-half times the amount
estimated for the fifth year, double for the fourth, 50 per cent for the third, and 25 per cent the second year.
“The actual value of public sector stocks that will have to be sold by the end of this fiscal may exceed Rs 50,000 crore
as stock prices are expected to rise later once the clouds caused by the euro zone crisis lift,” officials said. A similar
Rs 50,000 crore could be raised by PSUs if they issue new shares.
The divestment department, which plans to sell stakes in Engineers India, Coal India, SAIL, PowerGrid and
Hindustan Copper by the middle of this fiscal, has also written to Rashtriya Ispat Nigam Ltd, Nalco and Shipping
Corporation of India asking them to get listed.
“Prominent PSUs which will have to come out with stake sales include Hind Copper, MMTC, NMDC, Engineers India,
PFC, MRPL, NTPC, NHPC, Bharat Electronics, United Bank etc,” said Thunuguntia.