Retail investors to get greater pie in next PSU divestments

The response of retail investors to PSU divestments had not been encouraging in the past with the 10 per cent reserved quota barely managing to get fully subscribed.

To encourage participation of small investors in PSU disinvestments, government has decided to double the quota reserved for retail investors to 20 per cent for the forthcoming stake sales in bluechip companies like Oil and Natural Gas Corporation and Coal India.

The decision assumes significance following the enthusiastic response from retail investors in the Friday's stake sale in steel major SAIL, which fetched the government Rs 1,715 crore (Rs 17.15 billion).

"In the forthcoming OFS, 20 per cent of the offer size shall be reserved for retail investors," an official told PTI.

So far 10 per cent of the share sale was reserved for retail investors, who are allowed to invest up to Rs 200,000 in the OFS.

Also a 5 per cent discount was offered to them over the bid price.

However, in Follow on Public Offer, 35 per cent is reserved for small investors.

The response of retail investors to PSU disinvestments had not been encouraging in the past with the 10 per cent reserved quota barely managing to get fully subscribed.

The successful SAIL OFS, the official said, has shown big appetite for PSU shares among retail investors.

"Increased retail participation will improve ownership of public in CPSEs and also help achieve the objective of disinvestment policy," the official added.

As per the data, retail investors bid for over 5.49 crore SAIL shares -- 2.66 times of the 2.06 crore shares reserved for them.

The SAIL OFS was over-subscribed more than two times.

The Budget 2014-15 proposed to garner Rs 43,425 crore (Rs 434.25 billion) from PSU disinvestment, of which about 30 per cent is expected to come in from 5 per cent (worth around Rs 17,000 crore or Rs 170 billion) stake sale in ONGC.

Besides, a 10 per cent stake sale in Coal India is on the table and could fetch over Rs 20,000 crore (Rs 200 billion).

The other state-owned firms that are lined up for offering include 11.36 per cent stake sale in NHPC and 5 per cent each in PFC and REC.

Under the OFS mechanism, at present a minimum of 25 per cent of the shares offered are reserved for mutual funds and insurance companies.

The government has been using the OFS route for disinvestment of PSUs.

Market regulator Sebi has permitted the promoters of top 200 companies to use the auction route or OFS route to dilute stake in listed companies. It also permitted OFS in those PSUs which were to meet the minimum 25 per cent public holding norm.