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m Disinvestment:-The withdrawal of capital from a country or corporation
6 To find growth.
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6 To solve critical Balance of Payment situation
6 Underperformance of PSU¶S
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3
4
Sends recommendations Inputs from adm.
Ministry and
Department of
disinvestment
5 6
Cabinet Committee of Core Group of IMG constituted
Disinvestment(CCD) Secys. for implementation
(CGD)
(Does monitoring)
7
Committees involved in the Disinvestment Process
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m
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m Headed by the Cabinet Secretary
m Functions:
m Functions:
o To consider the advice of the Core Group of
Secretaries
o To decide the price band
m Inter-ministerial consultation
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m Established on 23rd November 2005
m Residual 25% of the annual income will be used to meet the capital
investment requirement
Methods Of Disinvestment
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m Y ! " !# $ #
Suitability:
ż Companies which have a sizeable floating stock
with good intrinsic value and good future prospects
ż Companies not in need of significant technical,
managerial, marketing inputs etc.
Methodology
ż Conversion of equity into an attractive and suitable
capital market instrument, plain vanilla bonds,
deep discount bonds, fully / partially convertible
bonds, bonds with warrants attached, preference
shares with / without warrants
ż Preparation and circulation of an information
memorandum (IM) among institutional investors
ż Placement of the instrument
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m $Y
Methodology: Offer by company to buy-back its shares
from others
ż Through tender route
ż Buy-back at fixed price
ż In case of over subscription, acceptance on
proportionate basis
ż Through book building
ż Buy-back through Dutch Auction route- price discovery
through bidding by interested investors- and allocations
made at cut-off-price
ż Valuation to factor in future loss of dividend to the
sellers.
**&
m arehousing
m Trade Sale
m Asset / inding up
(1991-2009)
DISINVESTMENT IN 1991 O 1992 :
IN BUDGET SPEECH 1991-1992 :
m T O TRANCHES :
m DECEMBER 1992 :
m MARCH 1993 :
m THREE TRANCHES:
m IMPORTANT CHANGES:
m IN BUDGET SPEECH:
m PSEs DISINVESTED :
1) CONCOR
2) GAIL
3) IOC
4) VSNL
5) ONGC
àà
à +,,,$-555
m TARGET RECEIPT O RS. 10,000 CRORE
m PSEs DISINVESTED :
m POLICY ADOPTED:
m PSEs DISINVESTED :
m PSEs DISINVESTED :
2) ITDC««.100%
m PSEs DISINVESTED:
2) IPCL- 29%
3) GAIL O 10%
4) ONGC O 10%
àà
à -55/$-550
m TARGET RECEIPT O Rs. 4000 CRORE
m PSEs DISINVESTED :
ù PSE DISINVESTED:
m PSE DISINVESTED:
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m MOIL LTD
m SJVN LTD
m NMDC LTD
m NTPC LTD
m NHPC LTD
à àà
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44 6
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m (i) A rights issue by MUL in the first phase of Rs.400 crores with
Government renouncing its rights share to Suzuki. Suzuki would gain
majority control and pay Rs 1000 crore to Government as control
premium.
m (ii) Sale of its existing shares through a public issue in the second
phase ; the issue to be underwritten by Suzuki.
7*&#&*
m Disinvest has helped the company in getting cheaper funds
for the advancement of existing plants and creating new
ones
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Fact File
Mines
Top line
898 Cr.
PAT 56 Cr.
à %
%à&8!%( 7 %"
Valuation Conundrum
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The Verdict
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Post Sell Out Drama
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Government¶s Strategy
Infusing New
Capital > Meet the growing budget
deficit
> No transparency
The government has done a little or more so failed to attract foreign suitors
for the disinvestment process in India
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The government has to form a policy framework for the entire disinvestment process.
The government should de-link the disinvestment process from the budgetary
exercise.
Government should stop setting up of the targets in every year annual budget and
should have a long-term plan.
A separate fund should be created for disinvestment and it should be kept under the
control of president and the fund should be utilized for building infrastructure and
developing the social sector.
Timing of disinvestment is crucial and the government should follow a specific
method or process in order to reap more chunks.
The entire exercise of disinvestment should be audited by not less than two reputed
auditing firms in order to have a fair and transparent picture of the entire process.
Finally, the government should have an 'Yearly Action Plan' which should spell out
the activities carried out in that particular year and at the end of the year an 'Action
Taken Report' has to be submitted.