Expect PSU stake sales as Sebi ups public holding





The Securities & Exchange Board of India (Sebi) on Thursday sought to breathe fresh life into the stock markets through a series of steps, including a mandatory 25% public holding in state-run companies and a 10% reservation for retail investors in share sales through the exchanges.

Currently , listed public sector companies need a minimum 10% public shareholding, and the increase in the threshold will result in a string of equity issues, helping the cash-strapped government mop up over Rs 60,000 crore, based on current market price. Sebi chairman U K Sinha said 36 companies would have to come to the market to comply with the new norms.

Over the next three years, the government will have to pare its stake in several PSUs, including Coal India, Nalco, SAIL and National Mineral Development Corporation. There are others like IndianOil and Bharat Electronics where the holding is a little over 75% and a minor dilution is required. Over the years, Sebi has got the government to comply with the mandatory 10% public holding requirement in several companies such as MMTC. The series of measures announced by Sebi on Thursday is expected perk up stock markets.

Although several companies had planned to raise capital by listing on stock exchanges, the poor sentiment in the markets had forced many of them to postpone their issues.

"We will see good offerings from PSU companies to bring their holdings in line with public holding norms.
On the whole, we will see a strong revival in the equity capital markets across products," Girish Nadkar ni, managing director at Motilal Oswal Investment Banking, said.

In addition, the forced share sale will help the government raise money . Coal India alone can raise Rs 35.750 crore as the government holds 89.65% stake.

Others like NMDC, NHPC, Neyveli Lignite Corporation and Steel Author ity of India will see large stake dilutions in value terms. The government owns between 80% and 90% stake in these PSUs.

While the government will be able to raise around Rs. 3,500 crore in case of a 5% stake dilution in NMDC, it will get close to Rs 3,200 crore for offloading its excess stake of 10.96% in NHPC. "Faced with a crippling revenue crunch, the government can reap the twin benefits of increasing its own revenues while increasing the participation of retail investors," D K Srivastava, chief policy advisor at consulting firm EY, said.