Disinvestment: Staff refuse to buy even as retail bids improve

NEW DELHI: The government’s efforts to attract retail investors to its disinvestment programme appears to have shown some result, but employee participation in issues by public sector units remains low.

“What we have found in the seven or eight instances is that whatever was reserved for employees has not been fully subscribed,” disinvestment secretary Sumit Bose said on Tuesday.

Employee subscription was for Rural Electrification Corporation (REC) at 75%, but in many cases it has been as low as 20-25%, going against the government effort to create greater stakes for employees in the company.

Even in the case of the recent follow-on offer by Engineers India only 60% of the employee quota was subscribed even when the overall issue was subscribed over 13 times with retail portion receiving bids for 2.35 times the shares reserved for it.

The poor employee subscription is despite many of the stockmarket bound companies facilitating demat accounts for employees, as challenges like remoteness of locations have prevented higher participation by employees.

The department of disinvestment has also started to pay a commission to brokers to ensure higher participation of retail and high networth individuals.

Under the system, the finance ministry will pay a commission of 0.35% commission for retail and 0.15% for high networth individuals. For issues up to Rs 1,000 crore, the brokerage would be paid within 30 days of listing, while for bigger issues it would be paid within 45 days.