The government has shortlisted seven merchant bankers to assist in the disinvestment process of state-owned Oil India Ltd (OIL).
The merchant bankers being shortlisted by the department of investment and public asset management (DIPAM) include Citigroup Global India Pvt. Ltd, Deutsche Equities India Pvt. Ltd, Edelweiss Financial Services Ltd, IDBI Capital Markets and Securities Ltd, ICICI Securities Ltd, JM Financial Ltd and SBI Capital Markets Ltd.
“The shortlisted bankers will make a presentation before an inter-ministerial group on 24 June. Financial bids will be opened immediately after the presentations,” said an official notification posted on the website of DIPAM.
In April, the government invited applications from merchant bankers for a 10% stake sale in OIL through offer for sale (OFS) route.
The government currently holds 67.64% stake in OIL and 10% disinvestment will yield around Rs1,433 crore to the exchequer. State-owned OIL is into the business of exploration, development and production of crude oil and natural gas.
Even as India has been missing its disinvestment goals, the government has set yet another ambitious target to raise Rs56,500 crore in the financial year ending March 2017 through stake sales in public sector units. Out of this, Rs36,000 crore will be coming from minority stake sale and the rest Rs20,500 crore from strategic stake sales.
According to information available with DIPAM, the government is also considering allotting shares to eligible and willing employees of OIL at a discount of 5% to the issue price (lowest cut-off price) up to a maximum of 5% of the OFS size subsequent to completion of the transaction under OFS.
“The employees will be eligible to apply for shares up to Rs2 lakh only,” the notification added.
Spokespersons of Citigroup Global India, Deutsche Equities India, Edelweiss Financial Services, IDBI Capital Markets and Securities, ICICI Securities, JM Financial and SBI Capital Markets could not be immediately contacted by InfraCircle.
The government had targeted a disinvestment target of Rs69,500 crore in the last financial year but later reduced the target as stock markets remained subdued.
Experts believe the target set by the government is achievable.
“The disinvestment target of Rs56,500 crore is highly achievable given that the government does the pricing right,” said Prithvi Haldea, chairman and managing director of Prime Database.
“The government should also think of institutional placement programme option for disinvestment and should give heavy discount of 10-15% to retail investors as 5% discount is not working,” Haldea added.
The government has lined up 16 companies for disinvestment in the current financial year including National Fertilizers Ltd, Rashtriya Chemicals and Fertilizers Ltd, Bharat Electronics Ltd, Oil and Natural Gas Corp. Ltd and Coal India Ltd, among others.
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