Cabinet approves listing of 11 CPSEs on stock exchanges

The
Cabinet Committee on Economic Affairs, chaired by the Prime Minister Shri
Narendra Modi has given its approval for listing of the following 11 CPSEs (Central
Public sector Enterprises) on stock exchanges:

As
approved, listing of CPSEs will be through public offer of shares upto 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 alongwith the mode of raising resources has been delegated
for decision on a case to case basis to the Alternative Mechanism, headed by
the Hon’ble 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 program, a price discount upto 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.

From
the economic and sectoral perspective, the decision to list 11 CPSEs on stock
exchanges through public offer will have the following advantages for to the
stakeholders:

                    
i.       
Post-listing, value of a CPSE has the
potential to be unlocked in multiples of book value of its equity with
respective increase in their market capitalization. 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.

                   
ii.       
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 program.

                  
iii.       
Listing of profitable CPSEs on the stock
exchanges also triggers 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/Stock
Exchanges, CPSEs are required to comply with a number of mandatory disclosure
requirements.

                 
iv.       
With 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.

Background:

The
Government has made the following announcement in Budget 2017-18:

“Listing
of Public Sector enterprises will foster public accountability and unlock the
true value of these companies. The Government will put in place a revised
mechanism and procedure to ensure time-bound listing of identified CPSEs on
stock exchanges…………..”

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AKT/VBA/SH