PSU divestment nod will come with names of merchant bankers

NEW DELHI: The government on Wednesday announced measures to streamline and fasten the process of divesting stake in public sector units, as it tries to meet the Rs 40,000 crore target from disinvestment proceeds in 2010-11. It will now clear the appointment of merchant bankers and other market intermediaries at the same time as it approves the case for disinvestment in public sector units.

“The appointment of merchant bankers and other intermediaries will now be taken up simultaneously with the process of seeking CCEA approval as soon as the minister in charge has approved the case,” according to an official statement after a meeting of the Cabinet Committee on Economic Affairs on Wednesday.

This would be a shift from the current practice where the department of disinvestment ( DoD) initiates the process of appointing merchant bankers and legal advisers for managing an issue only after the PSU gets the Cabinet approval for a public offer. The entire selection process can take up to a month from the time when bids are invited.

The only exception from the practice has been Coal India where the department has already selected the merchant bankers even before it gets CCEA clearance for a 10% initial public offering in the company.

“It is expected that the time saved will be optimally utilised in preparing for the actual transaction and in facilitating the disinvestment process,” the statement said.

The move is aimed at speeding up the disinvestment programme and ensuring that there is sufficient time between two public offers, which in turn would ensure investor appetite. “Whenever there are a large number of issues lined up, there is always a risk of investor fatigue. So they need to be planned carefully in advanced,” an official said.

The financial year 2010-11 is expected to be a busy one with as many as 10 PSUs likely to hit the market with their public offerings. The disinvestment department is already working on three big ticket PSU stake sales including those in Engineer’s India, Coal India and Steel Authority of India, which are expected to hit the market in the next few months.

About seven other PSUs including Indian Oil, MMTC, RINL and Shipping Corporation, Hindustan Copper, Power Grid and Manganese Ore India are also on the government’s disinvestment agenda for the year.

The government had recently also come out with new norms for selecting merchant bankers where more importance is given to their technical qualifications and experience and less weightage to their financial bids.