DoD tweaking PSU stake sale norms to attract retail investors
The Department of Disinvestment is working on tweaking the Offer For Sale (OFS) mechanism for PSU stake sale by carving out a separate 5 percent category for retail investors.
New Delhi: The Department of Disinvestment is working on tweaking the Offer For Sale (OFS) mechanism for PSU stake sale by carving out a separate 5 percent category for retail investors.
"We are looking at creating a separate bucket for retail investors. We will be discussing with Sebi if 5 percent could be reserved for retail buyers," a senior Finance Ministry official told PTI.
In the PSU stake sale under OFS mechanism or the auction route, retail investors get a very small portion as bulk of issue is cornered by institutions, who put bids at rates higher than the base price.
In public issues -- Initial Public Offer (IPO) or Follow on Public Offer (FPO) -- 35 percent is reserved for retail investors but there is no such reservation in the OFS. Retail investors are allowed to invest Rs two lakh in IPOs.
Under the OFS, 25 percent of the issue is reserved for mutual funds and insurance companies.
"We want retail investors to participate in PSU stake sale programme. The disinvestment programme should be all inclusive. Since retail cannot compete with institution pricing, we are thinking of reserving shares for them," the official said.
A decision to this regard would be taken after consultation between the disinvestment department, Sebi and merchant bankers among others, the official said.
Market regulator Sebi had last year allowed companies to come out with OFS for diluting promoter holding and achieve the minimum 25 percent public shareholding norm by June and 10 percent for PSUs by August 2013.
Emerging as the most-preferred share sale route for listed firms, the OFS mechanism has been used by as many as 35 companies to raise a collective amount of over Rs 43,000 crore since its launch.
Last fiscal, the government divested stake in seven companies by way of OFS to raise Rs 23,900 crore. However, allocation to retail investors was very less as institutional investors garnered majority of the pie.