BSE-listed state-run behemoth Steel Authority of India Limited (SAIL) is planning divestment in two tranches — the government will offload its 10 per cent stake while the company will also make as big a follow-on public offer (FPO) of fresh equity. The steel ministry has got in-principle nod from the finance ministry, and now it will seek the Cabinet approval. Each tranche would consist of 5 per cent fresh equity by SAIL and another 5 per cent of the government holding, the steel ministry said in a note.

By divesting its 10 per cent stake, the government is aiming to mobilise Rs 8,041.10 crore. Through its FPO, the navratna company will also be able to mop up an equal amount of money, which it needs to part-finance its expansion and modernisation drive that will cost more than Rs 73,000 crore.

“Considering the position of its present cash surplus as well as the position of internal resources likely to be generated during 2009-10 to 2014-15, SAIL needs to raise an additional Rs 35,000 crore from the market for funding capital expenditure. A part of this is proposed to be met through issue of additional equity capital,” said the ministry.

After the first tranche of additional equity of 5 per cent and as much disinvestment of government equity, the paid-up capital of SAIL will increase to Rs 4,336.9 crore and government holding will be reduced to Rs 3338.19 crore (77 per cent of the total paid-up equity). Presently the total paid-up equity of the PSU is Rs 4,130.40 crore — 413.04 crore shares of Rs 10 face value each. Its authorised capital is about Rs 5,000 crore. Its closing share price on October 20 was Rs 194.70, which pegs the company’s market capitalisation at Rs 80,418.89 crore.

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