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Govt to disinvest 5-10 PSUs in FY10: Sources

Published on Thu, Jul 16, 2009 at 14:10 | Source : CNBC-TV18

Updated at Thu, Jul 16, 2009 at 20:10

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There is no proposal to disband the National Investment Fund (NIF) as of now, reports CNBC-TV18, quoting sources. The government has the option of using part of the NIF corpus to fund social schemes. However, the government may route the NIF corpus through mutual funds.

As of now, the government parks divestment funds in the National Investment Fund.

The government, sources said, is likely to disinvest 5-10 companies this fiscal. Disinvestment is believed to start only with listed companies with less than 10% market float. It may take the market float in these companies to up to 10%.

Earlier, presenting the Union Budget, the Finance Minister had said that disinvestment will start with stake sales in listed public sector undertakings (PSU).

Here is a verbatim transcript of Abhijit Neogy's comments on CNBC-TV18. Also watch the accompanying video.

The Finance Ministry is looking at divesting stake in about five-ten companies, they will essentially in the first list of disinvestment that they will draw perhaps will be those companies where the government holding is between 90-100%, they would ensure that in these companies, the public float goes up to at least 10% that is the objective in the first list which will come out.

There will also be FPOs, follow on public offerings and there will be equity offerings and the government will dilute its stake which is technically called disinvestment on the back of such equity offerings.

The Finance Ministry has initiated discussions with ten ministries and they have been asked to get back with proposals on specific companies where the stake sale process could be initiated.

Also, the NIF which was the mechanism so far where the disinvestment proceeds were parked, the returns on those were actually used for social sector purposes and for restructuring sick units. We understand the government may not dismantle NIF but what it might do is actually draw an alternative mechanism of dealing with disinvestment proceeds where though they don't dismantle NIF, they actually get to touch the Corpus of the NIF and directly invest in social sector projects or can route through mutual funds into the government projects so these are the first initial details coming out.