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Govt allows external borrowing to fund acquisitions

The government will allow firms taking over government stakes in state-run companies to use external commercial borrowings to fund the acquisitions and subsequent public offer, a statement said on Thursday.

The government has widened its rules to allow potential bidders flexibility in raising resources following a string of successful government privatisations.

"In view of the impending large-scale divestment of PSU (public sector units) stocks in the near future, Indian bidders would be required to mobilise huge sums of money for purchasing these stocks," the statement said.

Under Indian takeover laws, acquirers of a 15 per cent or bigger stake in a target company must make an open offer to remaining public shareholders to buy a further 20 per cent.

The government plans to step up its privatisation drive in the months ahead, selling stakes in a metals firm, trading firm and two large oil companies and several other state-run firms.

Proceeds from the privatisation of state-run companies are expected to hit Rs 120 billion ($2.46 billion) in the financial year to March.

India's faltering privatisation plan got a boost earlier this year when it sold controlling stakes in a giant telecom firm (VSNL), an oil marketing company (IBP), India's second largest petrochemical firm (IPCL) and the nation's largest automaker Maruti Udyog Ltd -- a joint venture with Japan's Suzuki Motor Corp.

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