New Delhi: In a move to encourage greater employee participation in the government’s ambitious disinvestment plan, the finance ministry is likely to urge the market regulator Securities and Exchange Board of India (Sebi) to review regulations governing participation of employees in stake sales of public sector units (PSUs) under the offer for sale (OFS) route.

The OFS method, which allows auction of shares on platforms provided by stock exchanges, has been extensively used by the government for PSU stake sales since 2012.

At present, 5% of the size of the OFS is reserved for employees. They can individually invest up to 2 lakh for the reserved shares at a discount of 5% of the issue price. The finance ministry argues that the 2 lakh limit is too low and in case of PSUs with a small employee base, the 5% share reserved for the employees is not fully exhausted.

“The problem is if there a limited number of employees, they usually cannot exhaust the 5% of the shares on sale reserved for them. So, though you are reserving it for the employees, you are not permitting the employees to take full benefit of it. So, the 2 lakh limit reserved for employees should be increased so that they could bid for a higher amount. It could be so designed that first, the small investors among the employees will be allocated shares and after that, relatively larger employee investors will be allocated the shares," a finance ministry official said on condition of anonymity.

Prithvi Haldea, chairman and managing director of Prime Database, said the current limit of 2 lakh is too small. “It could be increased to 5 lakh. But there should be an upper ceiling; otherwise, there could be malpractices of employees getting outside funding and buying huge number of shares," he added.

When contacted, Neeraj Gupta, secretary, Department of Investment and Public Asset Management (DIPAM), said the said the matter relates to regulation by Sebi and DIPAM only operationalizes the stake sale to employees in line with Sebi guidelines.

“Government is committed to improving participation of employees in stake sales as it improves the involvement in management of the company," he added. Nearly half of all NTPC Ltd employees participated in the disinvestment of the state-run power producer, in which the government raised 203.78 crore. The offer of shares by government to eligible employees of NTPC Ltd was carried out from 27 June to 5 July.

Earlier, the highest ever employee participation was recorded during the offer of Indian Oil Corp. Ltd in May when nearly 40% of the employees participated, applying for 53.17% of the 1.2 crore shares on offer.

The government has set a divestment target of 56,500 crore for 2016-17, of which 36,000 crore is expected to come from minority stake sales in state-owned companies and 20,500 crore from strategic sales in both profit-making and loss-making state-owned companies.

A core group of secretaries on disinvestment, headed by the cabinet secretary, will soon take up proposals for strategic disinvestment from a list of PSUs submitted by government think tank NITI Aayog, Mint reported on 2 August.

NITI Aayog has submitted two lists to the government—one of loss-making state-run units to be shut down and another for strategic disinvestment. The lists have not been made public.

So far this fiscal year, the government has garnered 3,183 crore from minority stake sales in NHPC Ltd, Indian Oil Corp. Ltd and NTPC Ltd.

The government has lined up stake sales in two fertilizer companies—Rashtriya Chemicals and Fertilizers Ltd and National Fertilizers Ltd. It has also announced its intention to sell stakes in iron ore mining company NMDC Ltd, state-owned trading firms MMTC Ltd and State Trading Corporation of India Ltd, and Oil India Ltd.

The government has also initiated the process of selling its remaining stakes in Specified Undertaking of the Unit Trust of India (SUUTI), an offshoot of the erstwhile state-run investment firm Unit Trust of India (UTI), by inviting bids from bankers for the mandate to manage the stake sales in ITC Ltd, Larsen and Toubro Ltd (L&T) and Axis Bank Ltd in the first phase within a period of three years.

It holds a 11.17% stake in ITC, 8.16% in L&T and 11.53% in Axis Bank that could fetch more than 60,000 crore at current market value.

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