Govt can’t sell stake in PSUs for 1 year after public offer

NEW DELHI: The government will not be able to further reduce its equity stakes in state-owned NMDC, Satluj Jal Vidyut Nigam (SJVNL), Manganese Ore India (MOIL), Hindustan Copper and MMTC for one year following their proposed public offers.

A one-year gap from “the close of public offer and allotment of shares” is mandatory for the government before it can divest its stake further, a disinvestment department official said, who didn’t wish to be named.

“This is as per regulations on market operations of listed entities with low public float,” he said. The government currently holds 98.38% stake in NMDC. The government is disinvesting 8.4% of its stake in NMDC through a follow-on public offer. The offer opens on Wednesday and closes on Friday.

It plans to dilute some of its shareholding in other public sector companies such as SJVNL, MOIL, Hindustan Copper and MMTC in the new financial year. While SJVNL and MOIL are fully owned by the government, it owns 99.59% stake in Hindustan Copper and 99.33% stake in MMTC. “The same rule will apply to all future follow-on public offerings (FPOs) where market float of companies is less than this threshold,” he added.

The regulations will also apply to initial public offers (IPOs) of government entities as a one-year cooling off period is felt necessary for true discovery of share price of unlisted entities too, he said.

While the regulation puts a one year lock-in period for promoter shares, the companies will be free to issue fresh equity shares during the period to raise resource for carrying any expansion, he said. “This is a standard regulation stipulating that for public issues, there will be a one year lock-in period,” SMC Capitals’ equity head Jagannathan Thunuguntla said.

“While we are not barred to issue fresh equity during the period, the company does not require fresh funds for expansion before 2012,” said NMDC chairman & managing director Rana Som.

According to disinvestment secretary Sumit Bose, the government is not thinking about a second FPO of NMDC. “So the government’s position (vis a vis NMDC) is comfortable,” he said.

The government is selling off a minority stake in NMDC in a price band of Rs 300-350 per share.