The line-up for disinvestment

By now, it is quite clear that the Government does have divestment of its stakes in PSUs high on its agenda for the next few months. That may well allow investors to buy into a whole range of offers from listed as well as new PSUs. Which companies are likely candidates? Here’s a line-up:

The IPOs that may flag off the divestment process may well be NHPC, RITES and Oil India, which have already filed their respective draft prospectuses with SEBI over the past two years.

NHPC: NHPC is the country’s largest hydro power generator, engaged in planning, development and implementation of hydro-electric projects. Based on the offer document, the government stake will come down to 86.3 per cent post-issue. The earnings per share (EPS) for the FY09 is Rs 1.01.

RITES: RITES, under the Ministry of Railways, provides transport infrastructure consultancy, engineering and project management services. The PSU plans a fresh issue, bundled with an offer for sale that may bring down the Government’s stake to 72 per cent. The book value/share and EPS for the year ended FY07 were Rs 133 and Rs 30 respectively.

OIL India: Oil India is engaged in the exploration, development, production and transportation of crude oil and natural gas onshore. The company comes under Ministry of Petroleum and Natural Gas. The Centre’s stake will fall to 89 per cent post-issue. The offer document mentions an EPS of Rs 73.6 for the last financial year.

Long on the stake sale shortlist, the following PSUs are possible candidates which may seek listing through an IPO/offer for sale route.

Coal India is among the largest coal-producing companies in the world and is the only un-listed navaratna PSU (except for HAL, which comes under strategic area). CIL had a turnover of Rs 38631 crore in 2007-08. It is expected to hit the IPO market in near future.

Telecom major, BSNL and steel maker, RINL (Vizag steel), Cochin Shipyard, Telecommunications Consultants India and Manganese Ore are the other likely candidates that may tap the market. These entities have been on the divestment shortlist for quite a while.

Stake dilution is also possible in listed PSUs with a high proportion of government holdings. A 5-10 per cent stake sale in these companies will bring huge gains for the government, even without losing the management control. NMDC, BHEL, NTPC, SAIL, Neyveli Lignite, MMTC, RCF are likely follow-on offer candidates.

At current market prices, a 5 per cent stake sale in NTPC would fetch the government around Rs 8,864 crore. In case of Neyveli Lignite, SAIL, BHEL, MMTC and NMDC, the receipts would be around Rs 1,168 crore, Rs 3,570 crore, Rs 5,321 crore, Rs 6,800 crore and Rs 8,900 crore respectively.

Public sector banks that have a high proportion of government holdings are ripe for a dilution of stake, given their capital needs. While the stake dilution in PSBs will not help the government in terms of receipts, as fresh issues may be needed to bolster the banks’ capital adequacy requirements, it will save the government equity infusion from time to time.

Central Bank of India (80 per cent), Canara Bank (73 per cent), Indian Bank (80 per cent) and Bank of Maharashtra (76 per cent) are banks with high government stake. The unlisted United Bank of India is also considering an IPO in the near future.

http://www.thehindubusinessline.com/iw/2009/05/31/stories/2009053150290700.htm