Government To Sell NLC Stake To TN Government Via IPP

The government, today, clarified that it is set to offload 5% of its equity in Neyveli Lignite Corporation (NLC) to the state government-controlled corporations of Tamil Nadu. The Government of India has around 94% stake in NLC and in order to adhere to the minimum public shareholding norm, the government has to divest at least 4% of its stake in the company.

As employees of NLC opposed the disinvestment, Tamil Nadu Chief Minister J Jayalalitha has shown willingness to purchase the Government of India’s stake through the state’s undertakings. The Department of Disinvestment (DOD), today, requested the Tamil Nadu government to nominate a senior official for discussions into this with the SBEI.

Earlier, the government had proposed an OFS for offloading its 5% stake in NLC but after the proposed acquisition by the Tamil Nadu government, the Government of India is going for an Institution Placement Programme (IPP). As per the Finance Ministry release, this matter has been discussed with the SEBI, which is of the opinion that the proposal could get covered within the guidelines of the IPP. 

However, the exact details need to be worked out with the officials of the Government of Tamil Nadu, Ministry of Coal and the DOD. It has also been clarified that in the offer document for the IPP, the seller can propose the criteria for allocation. This can be used to give preference to any set of Qualified Institutional Buyers including stage undertakings of Tamil Nadu.

A DSIJ Mindshare published on July 4 had mentioned that the government is set to take-off a bigger disinvestment drive as issues like NFL, NLC, STC and ITDC are in the pipeline and will hit the markets in July with NFL and NLC to be the first ones to come up. As an OFS is not an easy route considering the resentment of employees, who have gone on an indefinite strike, Jayalalitha’s interest in buying the stake has come as a great respite to the government. 

Finance Minister P Chidambaram had clearly pointed out that the government is facing no issues in selling its stake to the Tamil Nadu Government. The NLC scrip closed at Rs 58.30 at the BSE on June 5, 2013 (Friday). Experts were of the opinion that the floor price of NLC could be around Rs 54 for the OFS proposed earlier but in the changed circumstances, it would be interesting to see at what price the centre would pass its stake to Tamil Nadu undertakings.