Government to sell 20 per cent stake in SAIL
20 Nov 2009
State-un Steel Authority of India Ltd (SAIL) will make a fresh issue of 10 per cent equity and in addition the government will divest 10 per cent of its stake. The combined 20 per cent sale is expected to raise around Rs17,000 crore from the market.
The proceeds of the fresh issue would go towards part-financing SAIL's Rs70,000 crore expansion programme. According to steel minister Virbhadra Singh's written statement to the Lok Sabha, the disinvestment would be in two tranches of 10 per cent each ina mix of fresh issue and sale of government shares.
The minister said a proposal for raising additional equity by SAIL to the extent of 10 per cent of the paid-up capital and disinvestment of a portion of the Government of India's holding in SAIL up to 10 per cent of the paid-up capital in two equal tranches is under consideration of the government.
The government's current holding is 85.83 per cent in the company's paid-up capital of Rs4,130 crore. The company plans to issue 458.8 million fresh shares in two tranches enabling it to raise over Rs8,500 crore at the current price plus an additional Rs8,500 crore will come divestment of 10 per cent equity.
According to media reports, the cabinet may take up the proposal for 10 per cent equity sale in December, including sale of 5 per cent fresh equity of the post-dilution capital by the company and sale of government holding in the same proportion.
Analysts say the sale of the first tranche might be completed in the current financial year itself as the company is in need of funds, and the second tranche will also be completed within a few months of completion of the first tranche. They say the expansion and modernisation of the public sector company will see it emerge as a much larger and more profitable steel firm by 2012.
