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Sunday, August 16, 2015

Govt drops banker selection process for stake sale in 5 PSUs

Govt drops banker selection process for stake sale in 5 PSUs

New Delhi: The government has scrapped the process of appointing bankers to manage stake sales in five state-owned companies, including India's largest iron ore producer NMDC, owing to poor response.

SBI Capital Markets, ICICI Securities and Yes Bank were the only three that expressed interest in managing sale of the group of five companies in the 'Basket One', which also included Oil India (OIL), MMTC, Container Corporation of India (Concor) and India Tourism Development Corp (ITDC). There was no foreign banker who bid for this batch.

"The Disinvestment Department was not happy with the response from the merchant bankers and hence, scrapped it," a source told PTI. The Department of Disinvestment (DoD) had initially decided to appoint four merchant bankers for the group or basket.

However, only three had bid for it. The government plans to sell 10% stake each in OIL and NMDC, 5% in Concor, 15% in MMTC and 12.03% in ITDC. "The department would again invite applications from merchant bankers for managing the stake sale," the source added.

Govt drops banker selection process for stake sale in 5 PSUs: The govt has scrapped the process of appointing bankers to manage stake sales in five state-owned companies. Photo: Pradeep Gaur/Mint© LiveMint The govt has scrapped the process of appointing bankers to manage stake sales in five state-owned companies. Photo: Pradeep Gaur/Mint

The merchant bankers, handling the basket of PSUs, were to be appointed for three years. At the current market prices, the stake sale in the five companies in Basket One could fetch over `9,000 crore.

The source said the government has appointed Deutsche Bank, ICICI Securities, SBI Capital Markets and Edelweiss Financial Services to manage sale of companies in Basket Two, which includes the largest power producer, NTPC. Kotak Mahindra Bank, JM Financial and Yes Bank had also pitched for the mandate for Basket Two, which also includes NALCO, Bharat Electronics (BEL), Engineers India (EIL) and Hindustan Copper (HCL).

The government intends to sell 5% stake each in NTPC and BEL and 10% each in EIL and NALCO. It plans to sell 15% of its stake in HCL. Another source said DoD had decided to bundle the PSUs as it does not want the merchant bankers to pick and choose companies for disinvestment.

Besides, the bundling would also reduce the number of roadshows to be conducted by the merchant bankers as that too can be clubbed. The government is targeting to raise `69,500 crore from disinvestment in the current fiscal. So far, due to volatile market conditions, it has been able to sell stakes only in two PSUs to raise over `3,000 crore.


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