Government to encourage more retail participation in divestment

The Department of Disinvestment is working on strategy to encourage more small investors to participate in divestment by making it easier for them to open demat accounts, which are required for these investment, and reduce the time taken for the same.

A senior official said that the government would take up with the Securities and Exchange Board of India (Sebi) the issue of reducing the time involved in opening a demat account and making the process simpler to facilitate easier participation by retail investors.

Currently, it takes three to five days to have an operational demat account, which is a must to buy, transfer or sell shares or other securities held in the electronic format.

There are over 2.30 crore demat accounts in the country.

One of the suggestions that the government is looking at is an aggressive strategy for creating awareness among retail investors to participate in stake sale, the official explained.

To attract more retail investors, the government has already doubled the quota for such investors in stake sales to 20 per cent of the issue size from 10 per cent.

Retail investors, defined as those who can invest up to Rs 2 lakh in a public issue, get a price discount of five per cent in such issues. The recently held disinvestment of 10-per cent shares in Coal India garnered Rs 22,577 crore for the government, but its success was largely driven by domestic institutions like Life Insurance Corporation and some foreign funds while the retail quota remained undersubscribed at 44 per cent.

This was despite the 20-per cent reservation and five per cent price discount given to such investors.

Retail investors put in bids worth Rs1,852.55 crore during the one-day offer for sale amounted to less than half of 12.63 crore shares reserved for them.