Will govt sell SAIL's stake? CCEA decision today

The Department of Disinvestment will seek the Cabinet approval today to sell government’s 10.82 percent stake in Steel Authority of India (SAIL) through auction route.

The share sale is likely to fetch Rs 4,000 crore to the government. “The DoD’s proposal for disinvestment in SAIL is scheduled to be taken up by the Cabinet Committee on Economic Affairs tomorrow,” a senior official said on Wednesday.

The proposal is to sell the stake through offer for sale or auction route. The government at present holds 85.82 percent in the largest domestic steel producing company in the country.

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The Department of Disinvestment (DoD) in the Finance Ministry has not indicated a specific time-frame for the disinvestment as the “time of the issue will depend on market conditions”, the official added.

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The CCEA in April, 2010 had approved 10 percent disinvestment of government’s share in SAIL along with issue of 10 percent fresh equity by the company in two equal tranches.

However, due to some issues with merchant bankers and volatility in the market conditions the government deferred the SAIL offer.

The government aims to garner Rs 30,000 crore from disinvestment in public sector units in the current fiscal.

The government’s last stake sale in ONGC had met a lukewarm response and state-owned LIC had bought majority of the 10% of the oil major’s stake.

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The official said that the route of offer for sale of shares is for top 100 companies and SAIL falls within it, in terms of market capitalisation.

“So, disinvestment through offer for sale can be undertaken to sell 10.82 percent of government’s shares in the company,” the official added.

OFS is one of the two new share-sale tools introduced by the market regulator Sebi in January this year, especially to help corporates increase their public shareholding.

Sources in the DoD said it has been observed that share prices come under pressure once the government’s intention disinvestment come into public domain.

The government has already initiated the process of divesting stake in PSUs including Hindustan Copper , Oil India , BHEL , HAL and RINL in the current fiscal. The RINL initial public offering may hit the market by the end of this month.

Against its Rs 40,000 crore mop up target through the disinvestment route, the government could managed to raise only about Rs 14,000 crore through disinvestment last fiscal.

SAIL has embarked on a Rs 72,000-crore expansion plan in 2009 to increase capacity to 23.46 mtpa by March, 2013 from 13.82 mtpa now.

PTI