Ravi Mathur, Disinvestment Secretary, says purchasing company should be registered with SEBI as a qualified institutional buyer

NEW DELHI /COIMBATORE: The route of Institutional Placement Programme (IPP) may be adopted in respect of sale of five per cent equity in the Neyveli Lignite Corporation (NLC) as opposed to the Union government’s original scheme of selling the NLC shares through Offer for Sale (OFS) mechanism to the public.

This was indicated by Ravi Mathur, Disinvestment Secretary, and a release of the Central government on Sunday.

Mr Mathur, who was in Coimbatore to attend a meeting, told reporters that the SEBI’s stipulation was that the stake sale to State PSUs should be through the IPP route. Also, the purchasing company had to be registered with SEBI as a Qualified Institutional Buyer (QIB).

The official release stated that the SEBI had suggested that the proposal be covered within the IPP guidelines but the modalities needed to be worked out among officials of the State government, Coal Ministry and the Department of Disinvestment.

``In the offer document for IPP, the seller can propose the criteria on the basis of which allocation could be made. This can be used to give preference to any set of Qualified Institutional Buyers including State Undertakings of Tamil Nadu,” the release said.

About 10 days ago, Chief Minister Jayalalithaa made an offer, in her letter to Prime Minister Manmohan Singh, that the Centre should consider giving the five per cent shareholding in the NLC to Tamil Nadu State Public Sector Undertakings such as Tamil Nadu Industrial Development Corporation (TIDCO), State Industries Promotion Corporation of Tamil Nadu (SIPCOT) and Tamil Nadu Industrial Investment Corporation (TIIC).

On the amount of revenue to be generated through the stake sale, Mr Mathur, who is holding the additional charge as Minority Affairs Secretary, said it depended on stock market conditions. Still, it was estimated that the move would generate Rs. 400 crore to Rs. 500 crore.

CM writes to PM again

Painting a grim power-deficit scenario for Tamil Nadu, and the south as a whole, should the labour unrest persist over the Central Government’s decision to offload its equity in the Neyveli Lignite Corporation (NLC), Chief Minister Jayalalithaa on Sunday urged Prime Minister Manmohan Singh to regard the feasible measures suggested as alternatives to disinvestment.

In a letter to Mr. Singh, Ms. Jayalalithaa said the NLC was the largest Navratna Central Public Sector Undertaking in Tamil Nadu employing more than 25,000 persons and generating 2,490MW of power for the southern Region.

If the labour unrest continued, it would not only result in Tamil Nadu losing its share of 1,178MW and a relapse into power deficit, but a cumulative loss of about 2,500MW for the entire south.

In the light of the Securities and Exchange Board of India (SEBI) formally proposing to the NLC the possibility of arriving at a special procedure on a case-by-case basis for the offloading of shares by the Government of India, “it appears that working out an arrangement to offload 5 per cent equity, or even 3.56 per cent of the equity, to meet the target of 10 per cent, to Government of Tamil Nadu owned Public Sector Undertakings is something that SEBI can quite easily work out,” she wrote.

Recalling her June 25 letter in which she suggested that the 5 per cent shareholding be offered to one or more State-run undertakings, Ms. Jayalalithaa said the PSUs such as TIDCO, SIPCOT or TIIC met the criteria of ‘Qualified Institutional Buyers’ (QIBs) and were eligible to purchase shares under an Institutional Placement Programme. These entities also fell within the purview of “public” as defined under Rule 2(d) of the Securities Contracts (Regulation) Rules, 1957, she said.