FinMin hands out dos and donts for divestment

Reserve some shares for employees,ensure timely appointment of independent directors,avoid conflict of interest with disinvestment advisers and time your issues.

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Reserve some shares for employees,ensure timely appointment of independent directors,avoid conflict of interest with disinvestment advisers and time your issues correctly this is some of the advice handed out by a much wiser finance ministry two years and 11 stake sales later.

In its Handbook on Disinvestment Through Public Offerings,which was released last week,the finance ministry has tried to bring together all its advice to ensure successful stake sales in state-run firms.

To begin with,the ministry deals with the vexed issue of appointing independent directors in PSUs and the importance of fulfilling this criterion.The delay in appointing independent directors has derailed public issues of many PSUs including SAIL and ONGC.

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The finance ministry has also suggested that PSUs reserve a portion of the issue size for employees in order to maintain a sense of belonging,inclusiveness and to allow participation in the prosperity of the firm.

Singed by the recent experience of conflict of interest in the bankers it had appointed for the FPO of steel major SAIL,the book has clear guidelines for avoiding this problem. The guidelines are not only aimed at investment bankers,but also for selection of advertising agencies and legal advisors for stake sales.

Interestingly,the booklet,also advises on timing a public offer with a clear list of dos and donts. It has suggested avoiding certain periods of the year like shraadh which are considered inauspicious by domestic investors and also the holiday season from Christmas to New Year since foreign investors go on holiday during this time.