The Telegraph
Since 1st March, 1999
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Selloff sprint with PSU trio

New Delhi, March 31: The Congress-led government has decided to hit the fast-forward mode on divestment. It will bring before the cabinet committee on economic affairs (CCEA) plans to sell its stake in Hindustan Zinc, Engineers India and a part of the residual holding in Maruti.

The sales are expected to fetch the Centre Rs 1,500 crore in revenues, which will go into the newly floated divestment fund. Money from this pool will be spent on social sector projects and in reviving sick public sector units.

The move comes on a day the Indian Airlines board cleared an initial public offer that will cut the Centre's stake by 10 per cent.

Despite the Left's characterisation of PSU stake sales as 'creeping divestment', the finance ministry has circulated notes for the CCEA suggesting a 10 per cent stake sale in Hindustan Zinc to the public through book building.

Selloff in Engineers India, a firm under the petroleum ministry, had been stalled so far because it was privy to atomic secrets.

Eight per cent of the 18 per cent stake that the government holds in Maruti is also proposed to be sold, though there are conflicting perceptions on who it should go to.

A section within the government wants the entire 18 per cent to be sold not to financial institutions ' which is the overwhelming view ' but to retail investors at a discount to the current market price. Those who advocate this feel it will help boost market sentiment and bring in more individuals into the FII-driven market.

'Selling to FIs is selling to the government after all, given that the Centre owns most of them,' an official said.

Officials said merchant bankers will be appointed to work on the issue details once the CCEA clears the proposals. A group of ministers will oversee the flotation, fixing the prices at which bids will be called and shares sold.

'The issues would all be floated through the book-building route as we have found this option to be the most profitable,' officials said, adding that all stake sales to retail investors would be at a discount to the market.

Officials said they did not expect opposition to the proposals from the Left parties, which have told Prime Minister Manmohan Singh several times in the past that they would like the government to offer 'good logic' for bringing a state-owned firm to the stock market.

'We have thought through our reasons for the stake sales and are sure the Left will agree with us,' officials said.

For a government trying to find money for an ambitious social sector programme, the stock offerings will come as a big boost that would make it worthwhile to persuade the Left.

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