Government puts SAIL FPO on fast track

The government has put disinvestment of Steel Authority of India Ltd on the fast track. It will enable the company to file a final prospectus instead of first filing a draft.

The government's aim is to ensure it gets to its Rs 40,000-crore (Rs 400-billion) target from disinvestment proceeds before the end of 2010-11.

"This is their first ever public offer. It is a well-known company, so it is expected to be exciting," Sumit Bose, disinvestment secretary, told Business Standard.

The follow-on offer would be carried on in two tranches of five per cent divestment by the government and five per cent through the issue of fresh shares.

The second tranche is expected in late 2011-2012.

"The first tranche would happen by the first half of next month. We expect SAIL to perform very well in the market, as it is a well-known company," Bose added.

Last week, the company had held a meeting with investors and merchant bankers in Mumbai.

SAIL is expected to utilise the proceeds from the issue of fresh equity in funding capital expenditure.

It has an ambitious plan of increasing its hot metal production capacity from the existing 13.82 million tonnes per annum (mtpa) to 23.46 mtpa.

Presently, the government holds slightly more than 85 per cent stake in SAIL. After the divestment, its portion is expected to come down to about 69 per cent.

The public holding would increase to 31 per cent from 14.2 per cent.

This would, says the government, lead to greater transparency in and accountability from the company.

The government has collected Rs 22,763 crore (Rs 227.63 billion) this year by disinvesting in SJVNL, Engineers India Ltd, Coal India Ltd, Power Grid Corporation of India, MOIL and Shipping Corporation of India.

"We have had a very satisfying year, as all of them were over-subscribed. We are hopeful of reaching or getting close to Rs 40,000 crore (Rs 400 billion) by the next big-ticket issues of SAIL and ONGC. Investors' response could not have been better.

Beyond a point, we cannot push.

"The idea is to have people's ownership," Bose said.

In 2011-12, the government is expected to divest stake in Indian Oil Corporation, Hindustan Copper, Rashtriya Ispat Nigam Ltd, Minerals and Metals Trading Corporation and National Buildings Construction Corporation.