Pricing is everything

As expected, the Left parties opposed the government’s decision to divest up to 10 per cent of its stake in profit-making PSUs. But despite all the protests and calls for reversal of the move, an article in the latest edition of CPI’s weekly mouthpiece New Age surprisingly suggests some steps to make the disinvestment process a success.

It accepts that the government is serious about making a part sale of its stocks in select PSUs and points out that the criterion for pricing these stocks or fixation of their price bands will hold the key to the success of the disinvestment programme. The stocks of the PSUs are “grossly undervalued” compared to their private sector counterparts, it notes.

So, while the Left is busy chalking out an agitation against the disinvestment move, the article asks the government to undertake an equity restructuring exercise in some of the PSUs before putting its shares on the block.

Besides, the PSUs should be allowed to convert a substantial portion of their subscribed equity capital into either zero interest or very low interest long-term bonds to keep the equity capital low and given permission to either buy back shares from the market or acquire shares through a special rights’ issue for the purpose.

The reasoning — capital restructuring will allow the government to realise the true value of its shares from the phased disinvestment exercise now and in future. It will also allow PSUs to hold some shares in their respective companies alongside the government.

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