CPSE IPOs within five-and-half months of government nod

The Dollar Business Bureau

Setting strict timelines for the listing of profitable public sector undertakings (PSUs) on stock exchanges, the government has mandated the launching of IPO (initial public offer) within a period of five-and-half months after the approval from the concerned ministry.

Within 2 weeks of the announcement in the Budget for listing of all profitable central public sector enterprises (CPSEs), the Department of Investment and Public Asset Management (DIPAM) has handed out guidelines specifying the procedure and mechanism for listing of CPSEs in a time-bound manner on stock exchanges.

All CPSEs with a positive net-worth, having earned net profits back-to-back in previous three years and with no accumulated losses will be eligible for listing via divestment of 25% equity of the government, as per the guidelines.

It also proposed to create inter-ministerial groups headed by the secretary of DIPAM to guide and advise on the procedure for each listing.

There are 157 CPSEs which are in profit and out of them only 45 are listed presently, according to the Public Enterprise Survey 2014-15.

The profitable PSUs which are unlisted are Airports Authority of India (AAI), ONGC Videsh Ltd and Central Warehousing Corporation (CWC).  However, not all CPSEs which are profitable will be listed.

“Profitable large-sized and medium-sized CPSEs - no point in listing the small-sized CPSEs – should be listed. They should be opened up for scrutiny in public and maximum transparency. These should compete and set up themselves for how much worth these can grasp in the market,” Neeraj Gupta, Secretary, DIPAM told PTI.

Based on given criteria, there are around 50 PSUs which can be listed.

To accelerate the listing process of CPSEs in a timely manner, the government guidelines directed the concerned ministries to prepare the list of CPSEs which are eligible for listing within a month from the completion of audited financial statements of the previous financial year, as per the condition of having a positive net-worth, earning a net profit in three previous years and no accumulated losses.

The PSU Board will then convened a meeting within next 15 days to approve the listing and after that next 45 days will be for preparing the draft red-herring prospectus (DRHP) and also the appointment of auditors and independent directors which also include a woman director and conforming to its legal matters such as Demat of shares.

After that, the DRHP will be finalised and submitted with SEBI within 45 days.

Considering that SEBI will give its nod within one month, the guidelines provide next 30 days for marketing, roadshows and subsequent launch of the IPO.

Since 2009, only 6 PSUs have been listed including Coal India Ltd, SJVN Ltd and MOIL.