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Cabinet OKs plan to hasten state firm sales

Cabinet OKs plan to hasten state firm sales
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First Published: Wed, May 26 2010. 07 24 PM IST
Updated: Wed, May 26 2010. 07 24 PM IST
New Delhi: The Union cabinet approved a plan to speed up the sale of stakes in state-owned companies as the government aims to make nationalised companies more responsive to markets as well as cutting the fiscal deficit.
The cabinet will allow state-run companies to appoint investment bankers and other intermediaries at the same time as they seek cabinet approval for stake sales, allowing IPOs to proceed more quickly when market conditions allow.
Previously companies had to wait for cabinet approval before moving ahead with preparations, causing delays that have already sparked problems with valuations as market dip.
“It is expected that the time saved will be (used) ... in preparing for the actual transaction and in facilitating the disinvestment process”, a government statement said on Wednesday.
India aims to sell stakes in roughly 60 state-run companies over the next few years to help it bridge its fiscal deficit, which reached a 16-year high last year of 6.7% of GDP.
Coal India, the world’s largest coal miner, is expected to go to markets with an initial public offer for 10% of its stock which is expected to fetch $2.7 billion.
Even though the company is planning a listing by late July or early August, there have been delays in appointing bankers for the company, hitting the possible value of the sale.
Indian markets have come off their highs with the 30-share BSE index skidding this week to its lowest close in nearly four months.
Sources in the finance ministry have told Reuters the market decline has led the government to hold back the Coal India issue on fears of an impact on its valuation.
India raised $2.2 billion in March through an 8.4% divestment of miner NMDC and another $240 million by way of an IPO in state power utility SJVN Ltd.
Stake sales in Engineers India and Steel Authority of India Ltd are set to follow later this year.
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First Published: Wed, May 26 2010. 07 24 PM IST