NLC issue: Centre favourable to Jaya's offer???

Responding favourably to Tamil Nadu Chief Minister Ms. Jayalalithaa’s offer to buy 5% equity in Neyveli Lignite Corporation (NLC), the Union government’s Disinvestment Department has written to the State to depute an officer to discuss the modalities for the proposed sale. A communication to this effect was sent to State Chief Secretary Ms. Sheela Balakrishnan, according to Mr. Ravi Mathur, Secretary of the Department of Disinvestment, which comes under the Union Finance Ministry.

Mr. Mathur told journalists told that discussions among the Central and State governments and the Securities and Exchange Board of India (SEBI) would cover a number of issues, including pricing. Earlier, in a letter to Prime Minister Manmohan Singh, Ms. Jayalalithaa offered to purchase the stake through State public sector undertakings. Mr. Mathur said the SEBI had agreed to consider her offer. It was up to the Coal Ministry (under whose administrative control comes the NLC) to discuss the implications of the latest development with the NLC management and unions, which had been on strike to protest the disinvestment move.

SEBI had set an August 8 deadline for all listed Central public sector units to have a minimum 10% public shareholding.

IPP method may be adopted:-

The route of Institutional Placement Programme (IPP) may be adopted in respect of sale of five per cent equity in the Neyveli Lignite Corporation (NLC) as opposed to the Union government’s original scheme of selling the NLC shares through Offer for Sale (OFS) mechanism to the public. This was indicated by Ravi Mathur, Disinvestment Secretary, and a release of the Central government.               Mr. Mathur, who was in Coimbatore to attend a meeting, told reporters that the SEBI’s stipulation was that the stake sale to State PSUs should be through the IPP route. Also, the purchasing company had to be registered with SEBI as a Qualified Institutional Buyer (QIB).

The official release stated that the SEBI had suggested that the proposal be covered within the IPP guidelines but the modalities needed to be worked out

among officials of the State government, Coal Ministry and the Department of Disinvestment.          The release said that, in the offer document for IPP, the seller can propose the criteria on the basis of which allocation could be made. This can be used to give preference to any set of Qualified Institutional Buyers including State Undertakings of Tamil Nadu.

Earlier, Chief Minister Jayalalithaa made an offer, in her letter to Prime Minister Manmohan Singh, that the Centre should consider giving the five per cent shareholding in the NLC to Tamil Nadu State Public Sector Undertakings

such as Tamil Nadu Industrial Development Corporation (TIDCO), State Industries Promotion Corporation of Tamil Nadu (SIPCOT) and Tamil Nadu Industrial Investment Corporation (TIIC). On the amount of revenue to be generated through the stake sale, Mr. Mathur, who is holding the additional charge as Minority Affairs Secretary, said it depended on stock market conditions. Still, it was estimated that the move would generate Rs. 400 crore to Rs. 500 crore.

CM writes to PM again:- Painting a grim power-deficit scenario for Tamil Nadu, and the south as a whole, should the labour unrest persist over the Central Government’s decision to offload its equity in the Neyveli Lignite Corporation (NLC), Chief Minister Ms. Jayalalithaa urged Prime Minister Dr. Manmohan Singh to regard the feasible measures suggested as alternatives to disinvestment.

In a letter to Mr. Singh, Ms. Jayalalithaa said the NLC was the largest Navratna Central Public Sector Undertaking in Tamil Nadu employing more than 25,000 persons and generating 2,490MW of power for the southern Region. If the labour unrest continued, it would not only result in Tamil Nadu losing its share of 1,178MW and a relapse into power deficit, but a cumulative loss of about 2,500MW for the entire south.

In the light of the Securities and Exchange Board of India (SEBI) formally proposing to the NLC the possibility of arriving at a special procedure on a case-by-case basis for the offloading of shares by the Government of India, “it appears that working out an arrangement to offload 5 per cent equity, or even 3.56 per cent of the equity, to meet the target of 10 per cent, to Government of Tamil Nadu owned Public Sector Undertakings is something that SEBI can quite easily work out,” she wrote.

Recalling her earlier letter in which she suggested that the 5 per cent shareholding be offered to one or more State-run undertakings, Ms. Jayalalithaa said the PSUs such as TIDCO, SIPCOT or TIIC met the criteria of ‘Qualified Institutional Buyers’ (QIBs) and were eligible to purchase shares under an Institutional Placement Programme. These entities also fell within the purview of “public” as defined under Rule 2(d) of the Securities Contracts (Regulation) Rules, 1957, she said.

ROAD TO DISINVESTMENT
June 21, 2013	Cabinet clears sale of Centre’s 5% stake in Public Sector unit NLC
June 25, 2013	Tamil Nadu Chief Minister writes to Prime Minister, says TN govt is willing to buy Centre’s stake
July 01, 2013	Centre says it is open to TN’s offer
July 02, 2013	Nearly 30, 000 NLC workers go on strike
July 07, 2013	SEBI gives nod to TN’s proposal, but asks State Government to send a concrete plan

Related Links:

Why TN shows interest in buying NLC shares? SEBI strikes deal with Tamil Nadu Government