Probable Disinvestments post FY10

As the Government is likely to dilute ~10-15% of its stake in companies, the CPSE with 90% or more holding may be the first candidate for disinvestment after OIL, NHPC, MMTC and NMDC.

Below is a list of probable companies that are likely to attract the Government's attention for disinvestment.

Overview Disinvestment of the Government’s equity stake in Central Public Sector Enterprises (CPSE) started in FY92, with the sale of minority shareholding in 30 CPSEs to LIC, GIC, and UTI. Later on, MTNL (FY98), VSNL (FY97 and FY99), and GAIL (FY00) used the GDR route to raise capital. Over the years, the policy for disinvestment has evolved, particularly through the budget speeches of Finance Ministers. In December 1999, the Department of Disinvestment was established to focus on all matters related to disinvestment including implementation of disinvestment decisions. Following are the key objectives behind the Government's disinvestment plans: Decrease the government's restructuring spending to support financially weak CPSEs Induct a strategic investor with a proven record of technical, marketing, and managerial expertise Raise funds Induce operational and financial discipline through investors’ scrutiny Till date, the Government has raised more than Rs. 510 bn by disinvesting its stakes in companies including IPCL, VSNL, MTNL, CMC, Hindustan Zinc, BALCO, Maruti Udyog, and ITDC. Current Scenario The re-elected United Progressive Alliance (UPA) is likely to move decisively on the disinvestment front. As the UPA has a clear mandate and the obstructive left-front is not a part of the government, there are chances of limited political resistance pertaining to disinvestment. Moreover, as the Government’s fiscal deficit is expected to balloon to more than 10% of the GDP for FY10 due to the fiscal stimulus packages, farm-loan waiver, and the pay revision for government employees, the Government is looking at disinvestment as a viable option to improve its finances. Proposed Disinvestments in FY10 The Government has identified unlisted Oil India Ltd. (OIL) and National Hydroelectric Power Corporation Ltd. (NHPCL) for its disinvestment plans in FY10. These companies are likely to proceed with their IPOs before September 2009 as their regulatory approvals for listing lapse on September 12 and September 15, respectively. According to draft red hearing prospectus, the government may dilute 11% of its stake in OIL and 13.5% stake in NHPCL. Besides, the government has proposed to dilute its stake in Mineral & Metals Trading Corporations (MMTC) and National Mineral Development Corporation (NMDC) in the current fiscal, according to a preliminary draft of the disinvestment road map prepared by the Finance Ministry. OIL: Oil India Ltd (OIL) was incorporated on Feb 18, 1959, to expand and develop the oil fields of Naharkatiya and Moran in the north-east of India. In 1981, the Government of India became a wholly-owned stakeholder of OIL by taking over Burmah Oil Company Ltd’s 50% equity stake. OIL is engaged in the exploration, development, and production of crude oil and natural gas, transportation of crude oil, and production of LPG. OIL’s exploration activities are spread over the onshore areas of Ganga Valley and Mahanadi. OIL also has participating interest in the New Exploration Licensing Policy (NELP) exploration blocks in Mahanadi Offshore, Mumbai Deepwater,

and Krishna Godavari Deepwater, as well as various overseas projects in Libya, Gabon, Iran, Nigeria and Sudan. Source: Company data In FY09, OIL produced 3,468 million tonnes of crude oil, 2,268 mmscum of natural gas and 47,610 tones of LPG. The Company’s net sales stood at Rs. 72.41 bn, PAT at Rs. 21.62 bn, and EPS at Rs. 101 for FY09. NHPC: National Hydroelectric Power Corporation Ltd. (NHPC) was incorporated in 1975. The Company develops hydroelectric power projects. Presently, NHPC is engaged in the construction of 11 projects aggregating to a total installed capacity of 4,622 MW, including 520 MW under implementation by Narmada Hydroelectric Development Corporation (NHDC). The Company has added 1970 MW during the 10th Plan period. NHPC has 10 projects aggregating to a total capacity of 6871 MW that are awaiting clearances/Government approval for their implementation. Source: Company data

In FY09, the Company’s net sales stood at Rs. 26.72 bn, PAT at 10.4 bn, and EPS at Rs. 0.96. MMTC: Mineral & Metals Trading Corporations (MMTC) was established in 1963 and is the largest international trading company of India. MMTC trades in non-ferrous metals such as copper, aluminium, zinc, lead, tin, asbestos, and nickel, and bullion like gold and silver. Besides, it trades in fertilizers and fertilizer raw materials. Its international trade network spans almost all countries in Asia, Europe, Africa, Oceania and the Americas, providing MMTC a wide global market coverage. With its comprehensive infrastructural expertise to handle minerals and metals, the Company provides logistic support including procurement, quality control, and guaranteed timely deliveries from different ports around the world. Source: Company data In FY09, the Company’s net sales stood at Rs. 369.04 bn, PAT at Rs. 1.65 bn, and EPS at Rs. 33.08. NMDC: National Mineral Development Corporation (NMDC), incorporated in 1958, is engaged in the exploration of a wide range of minerals including iron ore, copper, rock phosphate, lime stone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite, and beach sands. It is India’s single largest iron ore producer and exporter; the Company currently produces 30 million tons of iron ore from three fully-mechanised mines at Bailadila Deposit-14/11C, Bailadila Deposit-5,10/11A, and Donimalai. Because of its excellent chemical and metallurgical properties, the calibrated ore from Bailadila deposits has substituted the iron ore pellets in sponge iron making and hence, became an important raw material for major gas-based sponge iron steel producers like Essar Steel, Ispat Industries and Vikram Ispat. NMDC is also venturing into the development of high-value minerals such as gold and diamond, through joint ventures with companies based in African countries.

Source: Company data In FY 09, the Company’s net Sales stood at Rs. 75.6 bn, PAT at Rs. 43.7 bn, and EPS at Rs. 11.03.