The
government is racing against time in a desperate attempt to meet its disinvestment target with another four companies lined up for the current year. However, analysts are of the view that the rush to
disinvest public sector companies at a discount often leads to existing shareholders losing out as the stock price of the company falls and the market cap gets eroded. What is worse is that this budget document singularly states that all disinvestment proceeds will be channelised to either recapitalise Public Sector Undertaking (PSU) banks or fund the future capex of Indian Railways while they are routed through the National Investment Fund. So, shareholders will be paying for the government's own inefficiencies in two sectors with good money being thrown after bad.
An analysis by Mail Today shows that this has happened with most of the public sector companies
divested in recently . In the case of Hindustan Copper the floor price offered for the sale of shares on November 23, 2012, was fixed at a hefty discount of 41 per cent to the market price in order to kick-start the disinvestment programme. The government set the floor price of Rs 155 a share for divesting 4 per cent stake in the company compared to the last closing price of Rs 266.30 on the Bombay Stock Exchange on the previous day.
The government succeeded in raising Rs 810 crore at a price of Rs 156.56 a share. However, the flip side of the coin is that the current price of the Hindustan Copper share has come down Rs 113.30 which constitutes a sharp erosion in the market cap.
Similarly, in the case of National Mineral Development Corporation (NMDC) the floor price was set at Rs 147 on December, 12, 2012 which was at a significant discount to the previous day's price of Rs 159.30 . The current price of NMDC is ruling at Rs 143.25 which is more than Rs 15 a share lower than the pre-disinvestment price. In the case of power major NTPC which was disinvested in February this year the floor price was fixed at Rs 145 per share which was also at a discount to the prevailing price of Rs 152.30 a share.
According to senior officials, the discount route was chosen as the ONGC stake sale offer during 2011-12 had flopped.
With the public offer to sell 12.5 per cent stake in Rashtriya Chemical and Ferilisers (RCF) also getting cleared there are at least four public sector companies that are in line for being invested in 25 odd days that remain in March. These include MMTC, SAIL and NALCO. BHEL was also cleared earlier. However, a senior finance ministry official told Mail Today that the government would not go in for a distress sale.
Courtesy: Mail Today
Special 
