Govt clears divestment in SAIL; to fetch Rs 16,000 crore

Govt clears divestment in SAIL; to fetch Rs 16,000 crore

Steel major SAIL will with be first state-owned company to hit the capital market this fiscal as part of the ambitious disinvestment programme to raise the targeted Rs 40,000 crore.

As part of the proposal, which was approved by the Cabinet Committee on Economic Affairs (CCEA), Steel Authority of India Ltd (SAIL) will raise an additional 10 per cent of the paid-up equity and the government on its part will disinvest 10 per cent of its holding.

"This will be done in two tranches. In each tranche, there will a five per cent FPO (follow on public offer) and five per cent sale of the government equity," Home Minister P Chidambaram told reporters after the CCEA meeting.

At current prices, it is expected that SAIL will get an additional capital of Rs 8,000 crore while the government will also get Rs 8,000 crore, he added.Share price of SAIL today closed at Rs 236.74, a sharp losss of over 7 per cent."The net result will be, after both tranches are completed, the Government of India's shareholding will be approximately 69 per cent. Public shareholding will be 31 per cent," Chidambaram said.

As of now, public shareholding in SAIL is 14.2 per cent.The proceeds from fresh issues of equity by SAIL will help in filling the resource gap for funding the steel Navratna's capital expenditure emerging from increased pressure on steel prices and diminished margins.
SAIL is currently undertaking a Rs 70,000 crore expansion programme to raise its installed production capacity from 13.82 million tonnes per annum (MTPA) to 23.46 MTPA.
The disinvestment of government equity in SAIL is in line with the policy sharing ownership of CPSEs with the public, while also raising the funds to finance its different social programmes.

In the last fiscal, the government had divested stake in REC, NMDC and NTPC, amid tepid response from public investors.The government had set a target of raising about Rs 40,000 crore this fiscal through disinvestment, while last year it was Rs 25,000 crore.
Other PSUs like Coal India Ltd, MMTC and Engineers India are also expected to follow suit. 

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