Cabinet panel clears disinvestment of 5 per cent equity in Neyveli Lignite Corporation

The cabinet committee on economic affairs (CCEA) today approved the divestment of 5 per cent equity of Neyveli Lignite Corporation (NLC), a Navratna central public sector undertaking, in which the government currently holds 93.56 per cent equity stake.

The divestment will be through an offer for sale (OFS) in the domestic market, according to Securities and Exchange Board of India (SEBI) rules and regulations.

NLC has an authorised capital of Rs2,000 crore, of which the issued and subscribed equity capital as of 31 March, 2012 is Rs1,677.71 crore comprising 1677.71 million equity shares of face value Rs10 each. After the divestment, Government of India's holding in the company would come down to 88.56 per cent.

The CCEA had earlier this month deferred a decision for sals of stake in NLC afer Tamil Nadu chief minister Jayalalithaa wrote to prime minister Manmohan Singh last month opposing divestment in the integrated mining-cum-power generating company.

Accordingbto her, the divestment in the company would lead to labour unrest and disruption of power supply from Neyveli.

However, the disinvestment department had communicated to the CCEA that there is no other option but to divest the stake in the company to make the company compliant with the minimum public shareholding norm.

SEBI has set a deadline of August 2013 for all listed central public sector units to have a minimum 10 per cent public shareholding.

Jayalalithaa had suggested delisting of Neyveli Lignite Corporation or amending the Securities Contracts (Regulation) Rules, 1957, to make a special exemption for the company from the minimum public shareholding rule.

Shares of Neyveli Lignite were trading at Rs59.80, up 3.64 per cent, on the BSE.

At the current market price, the stake sale could fetch around Rs466 crore to the exchequer.