As per the condition laid out at the time of giving the ‘navratna’ status, RINL has to get listed in the next two years, else the status would be withdrawn
Taking forward the drive to sell stake in state-owned firms, the finance ministry has asked the ministry of steel to divest about 10% of its stake in Rashtriya Ispat Nigam Ltd (RINL) within next two years and list the firm on bourses or else the PSU's status of Navratna will be withdrawn, reports PTI.
"Rashtriya Ispat Nigam Ltd (RINL) was recently given the Navratna tag. As per the condition laid out at the time of giving the status, RINL has to get listed in next two years, else the status would be withdrawn.”
"Thus, the Department of Disinvestment under the finance ministry has directed the steel ministry to divest some stake in the company within next two years and get it listed," a senior official of the PSU said.
At present, the Union government holds 100% equity in the steel maker. According to steel ministry sources, a minimum of 10% of government's stake could be sold in RINL through an initial public offer.
Department of Disinvestment joint secretary Sidhartha Pradhan had earlier said that RINL could be disinvested in January 2011.
RINL could be the fourth steel PSU after NMDC, SAIL, Manganese Ore India Ltd (MOIL), in which government is going for disinvestment to part-fund its social and infrastructure plans.
"Before carrying out the disinvestment in RINL, the company is likely to restructure its equity base to attract better valuations," the official said, adding that no estimates of the amount to be raised by the government through share sale of the company have been worked out yet.
RINL in March 2010 joined the club of Navratna companies like SAIL, NMDC, Coal India. The status gives more financial and administrative autonomy to the company's board. The board can take investment decisions for an amount of up to Rs1,000 crore, without seeking steel ministry's permission.
The Centre has set a target of raising as much as Rs40,000 crore through share sale programmes this fiscal. It had raised about Rs10,000 crore by selling around 8.38% of its stake in NMDC.
It is expected to raise a total of around Rs16,000 crore through SAIL share sale, which will see the government selling 10% of its equity in the steel firm and the company raising fresh equity in the same proportion.
In case of MOIL, the government is considering selling 10% of its stake and list the company on the bourses. According to Pradhan, MOIL could be divested by December.
Developers claim that they are reporting good sales across the country. What do their financial results indicate?
Property prices are shooting up in almost all realty projects across Mumbai, Delhi and Bengaluru, but are the properties actually selling at such high prices? After the March 2010 quarter results, most listed developers were quoted in media reports claiming that they were satisfied with the annual sales growth over the past fiscal.
However, the numbers portray a mixed bag of results. If we compare the operating profit of FY09-10 versus FY08-09, of a few listed real-estate companies, this is the picture that emerges. DLF Ltd has reported a fall of 36% in operating profit (FY10 was at Rs1,109.61 crore; FY09 at Rs1,721.58 crore), Sobha Developers Ltd has reported a drop of 6% in operating profit (FY10: Rs254.5 crore; FY09: Rs269.7crore), Parsvnath Developers Ltd reported 5% annual growth (FY10: Rs233.31 crore ; FY09: Rs221.24 crore).
Only Orbit Corporation Ltd has bucked the trend and reported 71% growth in operating profit (FY10: Rs154.87 crore; FY09: Rs90.43 crore).
Unitech Ltd and Omaxe Ltd have not declared their annual results for the last fiscal ended March 2010. We decided to compare their results of FY08-09 with the performance for the first nine months of the last fiscal, ending December 2009.
Unitech Ltd reported a drop in operating profit of 23% (FY08-09: Rs1,047.41 crore; annualised performance for nine months ended December 2009 at Rs808.08 crore) while Omaxe Ltd reported a growth of 42% (FY08-09: Rs135.65 crore; annualised nine months: Rs192.51 crore).
“One of the major reasons for de-growth is that developers are initiating new construction when the corresponding sales are not happening. Developers are failing to report incremental sales. They are just holding on to high prices without being bothered about sales,” said Aditya Bansal, vice president (finance), Liases Foras.
There have been a few places in metros like Mumbai and Delhi, where a few residential properties have been sold for almost Rs50,000 per sq ft. However, this does not indicate that consumers are buying property at these hugely inflated rates—Moneylife has consistently reported on how developers are not being able to sell real estate at current rates.
“As for the quarter ended March 2010, prices have gone up further by 15%-20% and we are estimating sales to be down further by 25%-30%. Property prices are (now) indicating the rise of another asset bubble,” said Pankaj Kapoor, founder, Liases Foras.
A slew of changes in the way funds are created and sold, would come about in the next 12-18 months, asserted KN Vaidyanathan, an Executive Director of SEBI, while speaking to Moneylife in an exclusive interview. This is the first story of a series
The Securities and Exchange Board of India (SEBI) is pushing for a series of reforms over the next 12-18 months to streamline further the process of how mutual funds are created and sold. This would mean further changes in the roles of distributors—both national distributors and Independent Financial Advisors (IFAs) who are currently not regulated.
In an exclusive interview to Moneylife editor Debashis Basu, KN Vaidyanathan, an Executive Director of SEBI said, “We will first deal with the banks and national distributors and then handle the IFAs. We have already started doing certain things. We have taken the exam away from the Association of Mutual Funds in India (AMFI). It will be handled by National Institute of Securities Markets. The test will be more current. There will be a demarcation between passing the test and getting the certificate.”
When it was pointed out that with the smaller IFAs pushed to the background, banks have emerged as powerful national distributors leading to a lot of mis-selling, Mr Vaidyanathan replied: “It’s true that banks alone enjoy the trust of investors and some of them have been abusing that trust. Maybe the fund distribution will be done by a different set of banks, provided the fund companies get their product right. Instead of feeding investors 10 different funds, nothing stops a fund company from offering one fund that does asset allocation and ensures low volatility.” Indeed, as Moneylife has pointed out many times, mis-selling often starts with product design itself.
Mr Vaidyanathan is currently talking to the asset management companies as to whether mis-selling can be rooted out through an institutional process. “The key issue on the distribution side is how do you institutionalise the due diligence process. I told the funds, you can take the view that mis-selling is not mis-selling unless I am caught. That to me is low-grade. The issue is how do I build systems in an organisation which makes it institutionally difficult to mis-sell. Banks have such systems in place. When you open a new account, there are calls from the quality control departments asking questions about various service parameters—there is a verification of the on-boarding process in place. Does the mutual fund industry have this? Why not? After all, many of them have been set up by banks. This upsets me because they are making a distinction between banking and mutual funds, depending on what is on (the) balance (sheet) and what is off balance sheet.”
Based on Mr Vaidyanathan’s suggestions, funds are working on creating appropriate internal systems. SEBI is also pushing the fund industry to develop a code of ethics and stick to it.