INSUBCONTINENT EXCLUSIVE:
NEW DELHI: Government proposes to offload substantial portion of its stake in select blue chip companies this year to meet higher
disinvestment target even though the exercise will bring down its holding below 51 per cent level, the minimum holding required for an
entity to qualify as a central public sector enterprise (CPSE).
Officials in Department of Investment and Public Asset Management (DIPAM)
said that market regulator SEBI is expected to soon issue policy guidelines on Differential Voting Rights (DVR) that will allow promoters to
raise finds without dilution of control
Once these regulations are in place, government could consider divesting higher stake in CPSEs without losing control or changing the PSU
character of an entity.
At present there are more than two dozen CPSEs that are widely held by the public with government stake of less than
These include maharatna and navratna CPSEs like Engineers India Ltd (EIL-52 per cent), Indian Oil Corporation (IOC-52.18 per cent), Bharat
Petroleum Corporation (BPCL-53.29), Gail India (52.64 per cent), Oil and Natural Gas Corporation (ONGC-64.25 per cent), Power Finance
Corporation (PFC-59.05 per cent), Powergrid Corporation (PGCIL-55.37 per cent), NTPC, Shipping Corporation of India (SCI-63.75 per cent),
Bharat Heavy Electricals (BHEL-63.17 per cent), NBCC (68.18 per cent), Container Corporation (Concor - 54.80 per cent).
If government sells
more of its equity in these entities it could raise its disinvestment proceeds easily from the market without looking at other instruments
like share buyback, new issues of ETFs or higher dividend payout from PSUs including declaration of special dividend.
This would also
eliminate pressure on achieving disinvestment target, as even a small issue by a bluechip PSUs can get better realisation for government
The shares of most of these companies have got good valuation from the market
Government has set disinvestment target of Rs 90,000 crore for FY20.
"Golden share or DVR could be first step for the government to bring
down its holding in several non-strategic and non-core PSUs
This could be followed by government changing the definition of PSUs itself by mandating lower than 51 per cent government holding," said a
finance ministry official asking not to be named.
Last month market regulator SEBI issued consultation paper on DVR allowing companies to
issue shares having rights disproportionate to their economic ownership.
In India, DVR shares with inferior voting rights (Fractional
Rights/FR) or lower voting rights is already permitted by the Securities and Exchange Board of India
Now, SEBI is introducing DVR shares with Superior Voting Rights (SR) or higher voting rights along with FR.
DVR regulations are expected to
be introduced quickly as the Prime Minister's Office (PMO) has also favoured such a move
Officials of ministry of corporate affairs (MCA) and the finance ministry are also discussing DVR regulations and how it could be applied in
The changes would implemented for PSU after the new government takes charge at the centre.
DIPAM officials said once DVR structure is
formalised, they could also look at using this structure to scale up disinvestment targets as in most blue chip CPSEs the level of
government holding is close to 51 per cent.