There is a need for simplifying the pricing mechanism in the offer-for-sale route while divesting stakes in state-owned companies, Divestment Secretary Ravi Mathur said here on Wednesday.
The problem was around “double pricing”, and the government was keen to iron it out with market regulator SEBI, Mr. Mathur said at an investment summit here.
“The Divestment Department is open to discuss with SEBI whether we can come out with some better mechanism that has element of surprise and can prevent the double-price discovery method,” Mr. Mathur said.
Double pricing in the OFS route, he said, referred to the one determined by the Empowered Group of Ministers (EGoM) and the other by the market.
The OFS price, which had to be declared after trading hours on the day before the issue, was decided by the EGoM two days in advance when it met to consider whether to go for an OFS, he said. However, trading on particular scrip continued for two sessions before the OFS, and, hence, one was left with the scenario of two prices — one set by the EGoM and the other discovered by the market, he added.
“Accordingly, there may be an occasion when the price in the market may go below the floor price set by the EGoM. These are challenges we face in the OFS mechanism,” Mr. Mathur said.
It can be noted that though the OFS route, the government raised about Rs.18,000 crore in the final three months of the past fiscal, as part of the divestment programme, which fetched nearly Rs.24,000 crore in total.
On new divestment target of Rs.54,000 crore this fiscal, he said the department would try its best to achieve it.
For 2013-14, the government was aware that it needed to dilute up to 10 per cent equity by August in many listed entities to comply with SEBI’s minimum public holding norms, he said.
