Even as disinvestment proceeds for the current fiscal are unlikely to reach the budget estimate, the Finance Ministry has initiated a fresh effort to push minority stake sales in Central Public Sector Enterprises (CPSEs). It has invited bids to empanel merchant bankers cum selling brokers (MBSB) and legal advisors for stake sales.

“The GOI intends to empanel MBSBs for a period of two years (further extendable by one year) to disinvest its shareholding through the Offer for Sale through Stock Exchange Mechanism/sale of Shares in stock market (Dribbling) as per Securities and Exchange Board of India (SEBI)/Stock Exchanges Rules and Regulations,” proposal floated by the Department of Investment and Public Asset Management (DIPAM) said. A similar statement has been used for empanelment of legal advisors.

According to the Department of Public Enterprises (DPE), there are 389 CPSEs in India (as on March 31, 2022), out of which 248 are operating. 188 are profit-making and 68 CPSEs (excluding Public Sector Banks and Public Sector Insurance Companies) are listed on stock exchanges.

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Minority stake sales in various PSEs are carried out based on investor interest and market conditions, as per SEBI approved methods and norms. According to DIPAM, empaneled MBSB will be required to advise on the timing and the modalities of the OFS. They will advise on regulatory norms and assist in securing approval and exemptions. They are expected to ensure best returns to the government. They will conduct market surveys, and domestic and international roadshows to generate interest amongst prospective investors.

Empaneled MBSE are also required to arrange physical and/or online meetings with the top management of key domestic and international investors, including Institutional and HNIs, market for filling all buckets of various investors categories, including retail, facilitate communication about the growth potential of the company and articulate the key marketing themes and positioning of the company. They will undertake market research, assist in the pricing of the Issue, allocation of shares, and provide after-sale support, etc.  

Similarly, the scope for work for legal advisors include drafting, reviewing, and finalising the notice for filing with Stock Exchanges and Public Notice. They will be involved in drafting responses to queries received from SEBI, Stock Exchanges, depositories, etc., until the completion of all activities relating to OFS. They will draft the consent letters to be taken from all intermediaries. They will provide advice, consulting, hold discussions with officials of the company during OFS. They will also provide other legal advice on research publication and dissemination, statutory and corporate advertisement in connection with the OFS as may be required.

OFS can be done for meeting the norms for Minimum Public Shareholding (MPS) or just to raise additional resources. During the current Financial Year 2023-24, so far, over ₹8,800 crore crore has been obtained through OFS, OFS (Employee), and Others, with Coal India alone contributing over ₹4,100 crore through OFS. Since there has not been any strategic disinvestment, there is very remote possibility of meeting the Budget Estimate for disinvestment receipts in the financial year 2023-24, which has been kept at ₹.51, 000 crore.

The government says disinvestment is an ongoing process, and the execution/completion of specific transactions hinges upon market conditions, the domestic and global economic outlook, geopolitical factors, investor interest, and administrative feasibility. Profit/loss is not among the relevant criteria for privatisation/disinvestment, it said.