Share pricing may complicate PSU divestment

Share pricing may complicate PSU divestment
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First Published: Thu, Jul 09 2009. 12 09 AM IST

Updated: Thu, Jul 09 2009. 12 09 AM IST
Mumbai: If wishes were horses, the Indian government could raise up to Rs1.24 trillion by divesting stakes (with the government retaining about 75%) in listed public sector companies with a very low floating stock in the stock bourses. That is, if one only refers to the prevailing share prices as the benchmark for pricing the shares for divestment of government companies.
But this is a simplistic calculation, because the price discovery of the shares of these public sector companies are not very efficient in view of the low floating stock. Just a few buy orders can skyrocket their share prices and vice versa.
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For instance on Wednesday, till 1pm just one trade was reported in the BSE at the MMTC counter, a company which trades in metal commodities. The MMTC share price gyrated in a range of Rs25,900 to Rs28,700. The 52-week high-low price band for the MMTC scrip was even more disparate, swinging from a low of Rs9125 to Rs39,090.55.
The market capitalization for the PSU company that reported a net profit of Rs200 crore in financial year 2007-08, was Rs1,40,848 crore with the government owning more than 99.93% of the equity. If 25 % is offered to the public as per the new budget proposal, the government can pocket Rs34,268.32 crore from just one divestment proposal in a metal trading company.
Ditto with NMDC Ltd and NTPC Ltd, where the government owns 98.38% and 89.5%.
Graphics by Sandeep Bhatnagar / Mint
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First Published: Thu, Jul 09 2009. 12 09 AM IST
More Topics: Divestment | Shares | PSU | Commodities | MMTC |