PIB Press Release dated 8 April 2010- Raising of additional equity by the Steel Authority of India Ltd. (SAIL) and disinvestment of a portion of the Government equity in SAIL through offer for sale.
The Cabinet Committee on Economic Affairs (CCEA) approved the proposal for raising additional equity by the Steel Authority of India Ltd.(SAIL) to the extent of 10% of the paid-up equity and disinvestment of a portion of Government of India’s shareholding in SAIL by an extent of 10% through offer for sale, to be carried out in two separate trenches.
The Further Public Offering (FPO) would comprise the first trench of the fresh issue of 5% pre-issue paid-up equity of the company and offer for sale of 5% of the Government equity in SAIL. The CCEA has accorded permission for effecting the first trench and the second trench, similar to the first, would be issued at an appropriate time depending on prevailing market conditions.
The further offerings along with disinvestment would be carried out as per SEBI regulations and procedure adopted by the Department of Disinvestment which is the nodal agency for handling of disinvestment of the Government PSEs.
As a result of the FPO, there would be enhanced public holding in SAIL from the present level of 14.2% to 31% and it is expected that the enhanced holding would lead to greater depth in the market. As a result of the secondary offering and equity dilution, there would thus be larger public ownership of the company, leading to greater public oversight and increased accountability.
The disinvestment of Government’s equity in SAIL is in line with the overall policy of the Government that ownership of CPSEs would be shared with the public as articulated in both the President’s speech to Parliament and FM’s Budget speech. FPO of SAIL would allow for greater public accountability, and is expected to lead to greater depth in the market.
The proceeds from fresh issue of equity by SAIL would help in filling the resource gap in availability for funding SAIL’s capital expenditure emerging from the increased pressure on steel prices and diminished margins. SAIL is presently amidst massive expansion plans for increasing its installed hot metal production capacity from existing 13.82 million tonnes per annum (MTPA) to 23.46 MTPA in the current phase.
Link is being provided for easy reference to SAIL website: