Govt relaxes conflict of interest clause for bankers participating in PSU divestment

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26 Aug, 2025 12:21

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To have a smooth divestment process for FY18 the government is warming up towards participation of investment banks in the stake sale of public sector undertaking (PSU) companies.

Clarifying on the 'conflict of interest' clause, the department of public asset management (Dipam) has allowed the participating investment banks to take up certain types of capital market offerings by rival companies in the private sector.

The government recently floated a request for proposal (RFP), to appoint merchant bankers to help it find buyers for its minority stake in seven entities, in the power, finance, energy and metal segments.

This relaxation came after some interested investment banks, including Deutsche Bank, raised concerns over the ‘conflict of interest’ clause applicable for the share sale mandate in seven PSUs, including Indian Oil and NTPC, the Business Standard reports.

Dipam has also clarified these merchant banks will not be allowed to take up offers for sale (OFS), initial public offerings (IPOs) and follow-on public offerings of private companies in the same sector.

Last year, after an ambitious start to sell its minority shareholdings in the Specified Undertaking of UTI (SUUTI) fund, the government's divestment plan had hit a road block when it got a tepid response from  investment bankers and the initial request for proposal (RFP) had to be withdrawn.

In 2016, bidders complained that the conflict of interest clause were too restrictive and did not show much interest in participating . The government then reissued the RFP, with a much lenient clause and also increased the number of merchant bankers to six from three.

This financial year the government has set a divestment target of Rs 72,500 crore which it aims to achieve by raising Rs 46,500 crore via minority stake sale, Rs 15,000 crore through strategic stake sale and Rs 11,000 from the listing of various insurance companies.

Sources tell BS that the Centre aims to divest stake worth at least Rs 25,000 crore in the seven PSUs during FY18.