Want to reduce dependence on PSUs during IPOs: DIPAM’s Nukala1 min read . Updated: 27 Mar 2019, 07:16 AM IST
- Nukala was speaking at the IPO roadshow of state-owned Rail Vikas Nigam Ltd (RVNL) in Mumbai
- RVNL said that it will launch its ₹481.5 crore initial share sale on 29 March
Mumbai: The Department of Investment and Public Asset Management (DIPAM), the finance ministry’s arm managing PSU divestments, wants to reduce its dependence on public institutions, including insurance companies and banks, during initial public offering (IPOs), DIPAM joint secretary Venudhar Reddy Nukala said on Tuesday.
Nukala was speaking at the IPO roadshow of state-owned Rail Vikas Nigam Ltd (RVNL) in Mumbai. RVNL said that it will launch its ₹481.5 crore initial share sale on 29 March. The company has priced its shares in the price band of ₹17-19 per share. The public offering will close on 3 April.
The IPO will see the central government divest around 12.16% of its stake in the company.
“In the previous financial year, the investment from LIC and PSU banks was approximately ₹25,000 crore in our proceeds of ₹1 trillion. This financial year, we have achieved around ₹85,000 crore from divestments, and investments of only ₹5,000-6,000 crore has come from PSU banks and insurance firms," said Reddy.
“We don’t want to depend on any of these PSUs," he said, adding that it is their decision where to invest and where not to.
“For DIPAM, the market is supreme. We believe in taking all our PSUs to the market so that their true value is achieved. We might approach LIC through our merchant bankers to impress them to invest in our IPOs, but they are independent," he said. The only instrument that DIPAM has in approaching the market and attracting investors is pricing, Reddy added.
The department’s approach to reducing dependence on LIC and other PSUs to get traction for public offerings has meant that some of the recent PSU IPOs have struggled to attract substantial interest. This resulted in the IPO process having to be extended by an additional three days after the original three-day book building process.
Earlier this month, state-run MSTC Ltd extended its IPO by three days and cut its price band marginally after failing to get enough bids from institutional buyers. Last September, another state-owned firm, Garden Reach Shipbuilders and Engineers Ltd, extended its offer by three days, besides revising its price band after lukewarm investor interest.