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Cabinet approves listing of 6 public sector companies

Dec 29, 2018

The Union cabinet has approved listing of six public sector companies on Indian bourses through initial public offerings (IPO) and permitted state-run KIOCL Ltd to issue a follow-on public offer that may ease government’s fiscal deficit stress and help it to meet the Rs 80,000 crore disinvestment target in the current financial year.

According to the department of investment and public asset management, the government has been able to mobilise Rs 34,142 crore, which appears to be an uphill task as only three months are remaining to meet the budgeted disinvestment target.

The disinvestment proceeds are likely to help the government in achieving the fiscal deficit target at 3.3% of gross domestic product (GDP) for the current fiscal year, which currently appears precarious. Fiscal deficit in April-October was at 103.9% of the budgeted estimate. Finance minister Arun Jaitley had recently said he was confident that the government would meet the fiscal deficit target.

“The listing of CPSEs on the exchange shall unlock their value and encourage investor participation in the CPSEs (Central Public Sector Enterprises),” law minister Ravi Shankar Prasad said on Friday while briefing reporters.

The cabinet has also empowered a group of ministers to work out modalities, including timing, pricing and disinvestment route, which will help the government to expeditiously respond to the market and unlock best value for its stakes in companies that are prospective targets of disinvestment.

“Further, alternative mechanism comprising of the finance minister, minister of road transport & shipping and the minster of concerned administrative ministry has been empowered to decide on extent, mode of disinvestment, pricing, time etc. of listed CPSEs including, CPSEs to be listed in future,” Prasad said.

The cabinet has also relaxed the eligibility criteria for listing of public sector companies. “CPSEs with positive net worth and net profit in any of the immediately three preceding financial years shall be eligible for listing on the stock exchange,” an official statement issued by the government said.

“The move will help the government in mobilising resources, companies will have funds for expansion and CSR (corporate social responsibility) and work culture of these companies will improve. They will create value to boost their stock value,” said UD Choubey, director general of Standing Conference of Public Enterprises (SCOPE).

Confederation of Indian Industry director general Chandrajit Banerjee said the decision would have a positive impact on the government finances. “The government’s commitment to staying on course for unlocking value held in PSEs is reassuring and it is hoped that the IPO/FPO will take place in this financial year. We have been recommending that government progressively exit from non-strategic PSEs. The announcement today provides a route to this overall endeavour,” he said.

The six companies identified for IPOs are Telecommunication Consultants (India) Ltd, RailTel Corp. India Ltd, National Seed Corp. India Ltd, THDC India Ltd, WAPCOS Ltd and FCI Aravali Gypsum and Minerals (India) Ltd. KIOCL Ltd has approval to come out with a follow-on public offer.

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