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Disinvestment - defined
Meaning of Investment
Conversion of money or
Converting
Money Claims Securities Into Money or Cash
Disinvestment in a p.s.u
Transfer of Government
PSU
Transfer Of Ownership
Government
Government Holdings
Governments Strategy
Meet the growing budget deficit
The Government knew that they could make more money by selling off their assets cheaply
Faster realization value
Atomic Energy
Minerals specified in schedule to atomic Energy (Control of Production and Use) Order, 1953
Railway Transport
Methods of Disinvestment
Strategic Sale
Capital Market
Offer for sale Fixed Price / Book Building Secondary market / Private Placement
Reduction in Equity
Buy back of Shares Conversion of equity into other instruments
Other Methods
Trade Sale
Asset Sale and Winding up Management/Employees Buyout (M/EBO)
Cross Sale
Sale through De-merger/Spinning off
DISINVESTMENT PROCESS
Selection of PSU by MODI Approval by CCD Formation of IMG & Selection of Global Advisors
2-3 months
government.
Multiple Control
authorities
BALCOs Disinvestment
The deal was like loot of Chattisgarh in a day-light robbery. "Sterlite's offer for Balco is more than fair."
- Business World, March 12, 2001. - Chattisgarh CM, Ajit Jogi.
Fact File
Mines
Company running on Outdated technology. Cash Case for Disinvestment reserve 500 Cr. not adequate for Modernization
Share of Operating profit in total Profit Impact of Aluminum prices
Hindalco (Birla Group) Alcoa (US based) Sterlite Ind. (Anil Agarwal)
Analysis Paralysis
Reserve Price fixed at 514 Cr. using 25% mark up to the valuations arrived by DCF Model
Hue and cry by Opposition over valuation methodology Question Earnings Vs Asset Value
The Verdict
Sterlite Industries emerges as the highest bidder with an offer of 551 Cr.
suggestions
Clear policy & framework for disinvestment process
exercise