New Delhi: The Union government is now accelerating its divestment process to achieve its target of Rs 30,000 crore for this fiscal. The first in the list of the public sector undertakings where the government will dilute its stake is Rashtriya Ispat Nigam Ltd (RINL), for which the department of disinvestment met on Friday to chalk out the final timeline.
Sources say the department will also initiate a discussion on the price band of the initial public issue (IPO), adding that the process is likely to be completed by the end of July.
Officials speaking on condition of anonymity told NDTV that the draft red herring prospectus for the IPO will be filed in the next few days, after Friday’s meeting comes out with a timeline for the market debut. As far as the price band is concerned, divestment department officials said the price range given by the steel ministry and the PSU is between Rs 25 and Rs 35 per share, for which the final call will be taken by the empowered group of ministers.
Another finance ministry official added that the primary consideration for the EGoM would be to make the IPO attractive and attract maximum retail investors. Officials involved in finalizing the IPO said that the EGoM may approve a price band which may be Rs 2-3/share higher or lower than what is proposed by the divestment department in consultation with the PSU and the steel ministry.
RINL had filed the draft red herring prospectus with market regulator SEBI in May. As per the DRHP, the government will dilute a 10 per cent stake amounting to 48.9 crore equity shares, which may fetch the government Rs 1,500-1,800 crore.
UBS Securities, Edelweiss Capital, IDBI Capital and Deutsche Equities are the merchant bankers to the issue. Fitch Rating has assigned grade 4 to the IPO, indicating above-average fundamentals of the issue compared with other listed securities in the market.
Meanwhile, as the government worked towards finalizing the final timeline for the divestment, workers at the PSU opposed the move and called for a one-day strike on July 24. Though the company management did not comment on the proposed strike, steel ministry sources said that the issue will be resolved soon with the workers’ union. In fact, officials added that the government will continue to hold 90 per cent stake in the company even after divestment.
RINL, also known as Vizag Steel, runs a 6.3 million tonne steel plant in Visakhapatnam (Andhra Pradesh). Last fiscal, its revenue went up by 26.6 per cent to Rs 13,251 billion and EBITDA increased slightly to 9.9 per cent in FY12 compared to 9 per cent in FY11. RINL was accorded a Navratna status for PSUs last November, giving the company more operational autonomy.
20 points on PSU divestment through IPO
1. Cabinet clearance necessary before divestment of any PSU.
2. Cabinet also decides on the percentage stake that will be divested.
3. Cabinet also takes a call on the mode of investment.
4. The IPO mode is adopted for new listings.
5. A DRHP is filed based on the cabinet’s decision.
6. The DRHP is filed with the market regulator.
7. Details of the shares to be offered are mentioned in the document.
8. It also includes the financial statement and the operations of the PSU.
9. The divestment of a PSU is handled by the department of divestment, which comes under the finance ministry.
10. The empowered group of ministers decides the final price band of the IPO.
11. Based on the EGoMs decision, the issue opens for a particular period of days.
12. Shares are allotted based on the number of applications received till the final day.
13. If the issue is oversubscribed, the shares are allocated equally the highest bidders.
14. The balance of the subscription amount is refunded based on applications.
15. The fund raised goes to the exchequer if it is divestment of the government’s shares.
16. This fund is then used for various development programmes.
17. In case the PSU’s shares are being offered in the IPO, then the proceeds go to the company.
18. The PSU uses the funds for expansion and new projects.
19. Shares of the PSU are listed on the indices on a given date.
20. Shares start trading
Sources say the department will also initiate a discussion on the price band of the initial public issue (IPO), adding that the process is likely to be completed by the end of July.
Officials speaking on condition of anonymity told NDTV that the draft red herring prospectus for the IPO will be filed in the next few days, after Friday’s meeting comes out with a timeline for the market debut. As far as the price band is concerned, divestment department officials said the price range given by the steel ministry and the PSU is between Rs 25 and Rs 35 per share, for which the final call will be taken by the empowered group of ministers.
Another finance ministry official added that the primary consideration for the EGoM would be to make the IPO attractive and attract maximum retail investors. Officials involved in finalizing the IPO said that the EGoM may approve a price band which may be Rs 2-3/share higher or lower than what is proposed by the divestment department in consultation with the PSU and the steel ministry.
RINL had filed the draft red herring prospectus with market regulator SEBI in May. As per the DRHP, the government will dilute a 10 per cent stake amounting to 48.9 crore equity shares, which may fetch the government Rs 1,500-1,800 crore.
UBS Securities, Edelweiss Capital, IDBI Capital and Deutsche Equities are the merchant bankers to the issue. Fitch Rating has assigned grade 4 to the IPO, indicating above-average fundamentals of the issue compared with other listed securities in the market.
Meanwhile, as the government worked towards finalizing the final timeline for the divestment, workers at the PSU opposed the move and called for a one-day strike on July 24. Though the company management did not comment on the proposed strike, steel ministry sources said that the issue will be resolved soon with the workers’ union. In fact, officials added that the government will continue to hold 90 per cent stake in the company even after divestment.
RINL, also known as Vizag Steel, runs a 6.3 million tonne steel plant in Visakhapatnam (Andhra Pradesh). Last fiscal, its revenue went up by 26.6 per cent to Rs 13,251 billion and EBITDA increased slightly to 9.9 per cent in FY12 compared to 9 per cent in FY11. RINL was accorded a Navratna status for PSUs last November, giving the company more operational autonomy.
20 points on PSU divestment through IPO
1. Cabinet clearance necessary before divestment of any PSU.
2. Cabinet also decides on the percentage stake that will be divested.
3. Cabinet also takes a call on the mode of investment.
4. The IPO mode is adopted for new listings.
5. A DRHP is filed based on the cabinet’s decision.
6. The DRHP is filed with the market regulator.
7. Details of the shares to be offered are mentioned in the document.
8. It also includes the financial statement and the operations of the PSU.
9. The divestment of a PSU is handled by the department of divestment, which comes under the finance ministry.
10. The empowered group of ministers decides the final price band of the IPO.
11. Based on the EGoMs decision, the issue opens for a particular period of days.
12. Shares are allotted based on the number of applications received till the final day.
13. If the issue is oversubscribed, the shares are allocated equally the highest bidders.
14. The balance of the subscription amount is refunded based on applications.
15. The fund raised goes to the exchequer if it is divestment of the government’s shares.
16. This fund is then used for various development programmes.
17. In case the PSU’s shares are being offered in the IPO, then the proceeds go to the company.
18. The PSU uses the funds for expansion and new projects.
19. Shares of the PSU are listed on the indices on a given date.
20. Shares start trading
