CIL, IOC and PGCIL Issues Slated for December

After a lull of almost 7-8 months, the government has geared itself for another disinvestment drive. The ambitious plan of divesting government stake in PSU companies has taken a jolt due to poor market conditions. So far, just about Rs 1323 crore has been raised through this process as against the budgeted target of Rs 40000 crore for FY14. 

The Department of Disinvestment (DoD), Ministry of Finance is finalising its plan to tap the market. According to some senior officials of the department, 3 big issues, viz. Coal India, IOC and Power Grid, are set to hit the market by December end. The government is expecting to raise around Rs 15000 crore from these issues. Road shows have already commenced across the globe, with a strong entourage of government and company officials on the job.

“There is now a great sense of urgency in the DoD, and we are trying to push Coal India’s offer for sale (OFS) issue along with that of IOC in the month of December itself. If all goes well, Power Grid’s follow-on issue can also come within that time frame. But as it requires more paperwork, it may extend to January next year”, informs a high-level DoD official on condition of anonymity. Already, road shows for CIL’s issue have been started in South Asia, Europe and the US. Officials are considering the right time for the OFS, as whole plan of disinvestment depends majorly on CIL.

Experts are also of the view that the company’s announcement on November 18 about raising the cost of coal owing to the increase in cartage cost is to give the stock price some kind of spurt on the bourses. In the issue, 5% discount on the price will be given to employees and 10% of the issue will be reserved for them. The floor price of the issue may be decided by the government in the coming week, as the Finance Ministry is assessing the response of foreign investors.

The DoD has also fully prepared itself for the OFS of Indian Oil, the biggest oil refiner in the month of December itself. However, the company’s officials are opposing the issue at present over poor valuations. The company’s shares are trading at Rs 203, down from Rs 234 on September 19, 2013. But the Finance Ministry is in no mood to delay this sale and all the IOC officials has been instructed to take part in the road shows that are going on across the globe. The government currently holds around 79% in the company and is looking to dilute 10% (19.16 crore shares) of it via the OFS route, which will generate around Rs 3900 crore to the government.

Apart from these big issues, Power Grid Corporation’s FPO is also being planned. “As this is an FPO, and requires a whole lot of paperwork, planning, pan-India reach to the investors etc., but all efforts are there to hit market in first half of December itself ”, informs the DOD official. By way of this issue, the government seeks to dilute 4% (around 18.51 crore shares) of its equity. Along with this, the Ministry of Power is also looking to generate funds for expansion of the grid network in the country. The company will issue 13% fresh equity for the same. In totality, it will yield around Rs 1800 crore for the government and an additional Rs 5900 crore for the company.

So far in this fiscal, the government has generated Rs 1323 crore via disinvestment. These three issues are expected to garner a total of around Rs 15000 crore. If we add the buyback proceeds of Rs 2050 of NHPC to it, the total disinvestment proceeds for FY14 work out to around Rs 18400 crore – still short of the total target of Rs 40000 crore for the year. “If we take a look at the other disinvestment prospects during the current fiscal, the EIL, FPO and HAL IPOs are in the pipeline. All preparations for them have already been done, but they will depend upon the market conditions and may hit the market next year,” shares a DoD official.