Cabinet approves listing of 11 CPSEs on stock exchanges
13 April 2017
The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi on Tuesday gave its approval for listing of 11 Central Public Sector Enterprises (CPSCs) on stock exchanges.
The government plans to take public Rail Vikas Nigam Limited (RVNL), Ircon International Limited, Indian Railway Finance Corporation (IRFC) Ltd, Indian Railway Catering and Tourism Corporation (IRCTC) Ltd, RITES Ltd, all of which arespecialist units of Indian Railways; Bharat Dynamics Limited (BDL), Garden Reach Shipbuilders and Engineers (GRSE) Ltd, Mazagon Dock Shipbuilders Limited (MDSL), North Eastern Electric Power Corporation (NEEPCO) Ltd, MSTC Ltd and Mishra Dhatu Nigam Ltd (Midhani).
It is proposed that the listing of CPSEs will be through public offer of shares of up to 25 per cent of government of India's shareholding, which may include offer of fresh shares for raising of resources from market.
However, actual disinvestment in respect of each CPSE along with the mode of raising resources has been delegated for decision on a case to case basis to the alternative mechanism, headed by the finance minister.
The CCEA has also approved reservation of shares for the eligible employees of 11 CPSEs in accordance with the extant provisions of Sebi Regulations.
With a view to ensure wider participation by small investors in the CPSEs' disinvestment programme, a price discount up to 5 per cent on the issue price has also been approved for the retail investors and eligible employees of 11 CPSEs participating in this offer.
Post-listing, the value of a CPSE has the potential to be unlocked in multiples of book value of its equity with respective increase in their market capitalisation. Once the book value of 11 CPSEs is discovered through the listing process, it will facilitate raising of resources by these companies at comparable cost and hence, achieve higher growth through their expansion/diversification. This will also be reflected in the performance at the sectoral level and overall economic growth.
Listing of CPSEs will also promote 'people's ownership' by encouraging public participation in CPSEs. Reservation of shares not exceeding 5 per cent of the post-issue capital for the eligible employees of 11 CPSEs, with the further decision to allocate shares to retail investors and employees of CPSEs at a price discount will ensure wider participation of small investors in the CPSEs' disinvestment programme.
Listing of profitable CPSEs on the stock exchanges will also trigger multilayered oversight mechanism, which not only enhances shareholders' value but also promotes corporate governance norms in such companies. As per the listing requirements of Sebi / Company Law Board / Stock Exchanges, CPSEs are required to comply with a number of mandatory disclosure requirements.
With the general public becoming the shareholder in the company through the listing route, the management is open to public scrutiny and thus become more accountable to its shareholders, as per the extant disclosure norms and compliance for listed CPSEs.