Mumbai: Initial public offerings (IPOs) in unlisted public sector firms rather than follow-on public offerings (FPOs) in companies that are already traded on the markets will be the primary route for raising money, disinvestment secretary Sunil Mitra said in an interview.
Policy focus: Disinvestment secretary Sunil Mitra. Indranil Bhoumik / Mint
“FPOs will happen only if companies need money,” Mitra said. The government plans to list 60 unlisted public sector units although FPOs will dominate fund-raising plans in the last quarter of this fiscal.
The public issue of shares next month in NTPC Ltd, the country’s largest power generator, is likely to raise around Rs8,000 crore, Mitra said. An FPO of shares in NMDC Ltd, the country’s biggest iron ore producer, is likely in March, he said. In the next year, Coal India Ltd’s share sale will be a “big one”, he said. Edited excerpts:
What is the government’s focus going to be on in 2010? Would it be a lot of follow-on public offers (FPO) such as NTPC, REC (Rural Electric Corp. Ltd), which are established stocks and, therefore, easy to go through with 10% kind of offerings, or would the government focus more on getting many of the unlisted profit-making entities to the market as soon as possible?
In my view, government’s priority will be based on the policy that government has announced in November, which is a listing-led disinvestment approach. The objective is to unlock greater shareholder value in the government’s public sector undertakings and that is probably going to be the main thrust. Alongside, if there are listed companies that wish to go to the market and raise money and go for FPOs, then nobody is going to stop them really. It will all depend upon their needs for capex (capital expenditure).
We may also take a view on what the government’s equity holding is in that company and we may offer small portions— piggyback if that happens. That’s broadly going to be the line that we will see in the coming couple of years, I guess, may be more.
Some of the IPOs which the government may undertake or look to undertake, such as Sutlej Jal Vidyut (Nigam Ltd), may not meet with too much opposition. So they may be easy to push through, but the bigger ones, in money terms, are the ones such as BSNL (Bharat Sanchar Nigam Ltd), Coal India (Ltd), which may be slightly sticky to push through. Are those larger companies on the government’s agenda for 2010 or will it want to push through the ones which are easier to do from a doability perspective?
In the year ahead, it really would depend upon the plan that we are working on and we are working on a plan which covers as many as 60 unlisted companies—all profit-making with positive networths, no accumulated losses. These are good companies, they are strong companies. Of course, in this we have been in touch with Coal India. The department of coal has supported the proposal for their IPO. We would also hope that BSNL will come in, in the coming year. We have been in touch with BSNL but there are reports in the media which indicate that government wants that BSNL should also hit the markets through an IPO.
There would be others—these are the two big ones that I could think of but it will all depend upon the plan as we work them out, looking at what is the need for companies to raise money—whether through IPOs or through FPOs and whether some part of government equity, if it’s an FPO, would go along with that.
This phasing out we will do as we get into the month of March. Between now and then, I have announced that we would have an action plan looking at what is going to happen over the next couple of years by the month of March this year.
If it is REC, NMDC and Sutlej Jal Vidyut divestment that happens within this fiscal year itself—what is your estimate of what we may end this year with, in terms of proceeds that the government will get from divestment in various forms?
The present government approved four divestments in this year. The approvals happened through the months of October to early December and all four of them are going to go to the markets within this fiscal. We expect so. NTPC is the first... This happens in early February. In late February, we have REC. Both of these are FPOs and NMDC happens, we expect, in early March, to be followed by Sutlej, which we expect to be around the end of March.
The first three are FPOs and all will go by the auction route, which we have listed in the prospectus for NTPC and is now available to the public. We expect REC and NMDC will go the same route.
Insofar as how much money we can raise, I have been (a) little cagey about this because it all depends on what the markets are like and how attractive they are.
To me, the companies are extremely attractive and they should be very welcome to investors but it will depend. The first three are listed companies, so we know what they are trading at.
There are around 40 crore shares of NTPC and Sutlej that are on offer and NMDC has 33 crore shares and REC for the government portion is 4.3 crore shares—that’s the offer for sale. We know what prices they are trading at. The reason I do not want to give a number is that I do not want you and the public to hold me accountable if it doesn’t turn out the way I am hoping it will.
I will try to avoid a number but it’s something that anybody can calculate. One should be able to work it out.
Are there any other names which are on the table for discussion as you speak which might be brought to the market over the next three or four months?
I won’t talk about the next three or four months but let me certainly tell you that in the next year Coal India is going to be a big one. That is a large company, huge interest from my own understanding and discussions with merchant bankers, there is huge interest among the investor community world over—that is a big IPO.
I hope BSNL happens in the coming year. I cannot really say at this point in time around when, but I certainly hope that it does happen because BSNL does need to open up to public ownership primarily with a view to strengthening its own management and its accountability.