NEW DELHI: Railways minister Lalu Prasad, known for his staunch opposition to the disinvestment process, seems to have finally succumbed to government pressure for mobilising additional resources through a stake selloff. Railway PSU Rites is set to hit the market with its IPO in a few weeks to raise resources for its expansion programme.
The proposal is to offer 25% of the paid-up capital of the company through IPO. There are also plans to divest 10% government equity in the company. A group of ministers (GoM) is expected to meet this week to finalise the price band of the offer.
The divestment proposal has been on hold for 10 months. With the elections approaching, it seems the UPA government may finally go ahead with the proposal to reduce budgetary deficit of the railways. The funds raised through the market offering would be used by Railways’ consulting arm Rites to pursue its investment plans in overseas markets and participate in the domestic road sector projects, according to sources.
While last year the government was thinking of diluting its holding in the PSU by 20%, this year, it decided to increase its offer to 25%. With this, the government stake in the company would fall to 75%. The stake would come down further with the government selling its 10% equity in the company. The proceeds may be used by the government to finance social sector projects.
As per the plan, the IPO will follow a bonus share issue of Rs 36 crore that will be undertaken after a share split where the share valued at Rs 100 will be split into 10 shares of Rs 10 each. A Cabinet note in this respect was moved last year.
Rites filed a red herring prospectus with SEBI in April 2008 to enter the capital market with an initial public offering (IPO) of 1,40,00,000 equity shares of Rs 10 each. The price is to be decided through a 100% book-building process. The company’s net worth is Rs 400 crore and has been making profit for 32 years. The issue is expected to have a high premium, according to industry analysts.
Once approved, Rites would become the second PSU under the ministry of railways to get listed. The only railway PSU to have seen divestment is Container Corporation of India (Concor). The Rites issue is significant as a 2002 proposal by the disinvestment ministry to divest a majority stakes in Rites and Ircon was stalled by the then-railways minister Nitish Kumar.
Rites requires Rs 120 crore for forthcoming projects in the overseas markets and has proposed to invest Rs 50 crore for BOT projects in the highways sector.
The proposal is to offer 25% of the paid-up capital of the company through IPO. There are also plans to divest 10% government equity in the company. A group of ministers (GoM) is expected to meet this week to finalise the price band of the offer.
The divestment proposal has been on hold for 10 months. With the elections approaching, it seems the UPA government may finally go ahead with the proposal to reduce budgetary deficit of the railways. The funds raised through the market offering would be used by Railways’ consulting arm Rites to pursue its investment plans in overseas markets and participate in the domestic road sector projects, according to sources.
While last year the government was thinking of diluting its holding in the PSU by 20%, this year, it decided to increase its offer to 25%. With this, the government stake in the company would fall to 75%. The stake would come down further with the government selling its 10% equity in the company. The proceeds may be used by the government to finance social sector projects.
As per the plan, the IPO will follow a bonus share issue of Rs 36 crore that will be undertaken after a share split where the share valued at Rs 100 will be split into 10 shares of Rs 10 each. A Cabinet note in this respect was moved last year.
Rites filed a red herring prospectus with SEBI in April 2008 to enter the capital market with an initial public offering (IPO) of 1,40,00,000 equity shares of Rs 10 each. The price is to be decided through a 100% book-building process. The company’s net worth is Rs 400 crore and has been making profit for 32 years. The issue is expected to have a high premium, according to industry analysts.
Once approved, Rites would become the second PSU under the ministry of railways to get listed. The only railway PSU to have seen divestment is Container Corporation of India (Concor). The Rites issue is significant as a 2002 proposal by the disinvestment ministry to divest a majority stakes in Rites and Ircon was stalled by the then-railways minister Nitish Kumar.
Rites requires Rs 120 crore for forthcoming projects in the overseas markets and has proposed to invest Rs 50 crore for BOT projects in the highways sector.
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