Procedure Followed in Disinvestment
1. Minority stake sale through IPO/FPO involves the following steps:
- In-principle consent by the Administrative Ministry of the CPSE concerned.
- CCEA approves disinvestment of minority stake in the CPSE through IPO/FPO.
- Constitution of a HLC to guide and oversee the disinvestment process.
- Appointment of Advisers (Merchant Bankers/Book Running Lead Managers & Legal Advisers) by the IMG for the proposed transaction.
- High-Level Committee after considering the advice of the Book Running Lead Manager recommends price band/floor price to Alternative Mechanism.
- Alternative Mechanism decides on the price band/floor price, method of disinvestment, and price discount for retail investors and employees.
2. Minority stake sale through OFS involves the following steps:
- DIPAM forms a High Level Committee (HLC) consisting of officers from different departments.
- HLC recommends to AM the extent of minority stake to be divested.
- AM considers HLC's recommendation and gives in-principle approval.
- Merchant bankers-cum-selling brokers/Legal Advisors are appointed with the recommendation of the Inter Ministerial Group (IMG).
- DIPAM, alongwith the Administrative Ministry and CPSEs, undertakes Non-deal Roadshows
- Merchant Bankers recommends timing, amount of shares and discount to be offered.
- HLC considers recommendations of the Merchant Bankers and recommends timings and pricing to the AM.
- Alternative Mechanism decides on the price band/floor price, method of disinvestment, and price discount for retail investors and employees.
3. Buyback of Government Shareholding by a CPSE involves the following steps:
- CPSE's Board of Directors considers the Buyback as per the provisions contained in the Companies Act and the existing guidelines issued by DIPAM based on its net worth and cash balance, unless exempted by the Inter-Ministerial Committee for Monitoring of Capital Management and Dividend in CPSEs.
- The HLC recommends to AM on the Government's participation in CPSE's offer of buyback.
- Alternative Mechanism approves the participation of the Government in the Buyback and offer of Government's equity in the Buyback.
4. Strategic Disinvestment of CPSEs involves the following steps:
- For CPSEs under Strategic Sectors:
- NITI recommends CPSEs to be retained under the Government Control or to be considered for privatisation or merger or subsidiarization with another PSE or for closure.
- NITI Aayog's recommendations are put to the Core Group of Secretaries on Disinvestment (CGD).
- CGD recommendations are put to the AM.
- The AM has to approve the CPSEs to be retained under Government control or to be considered for privatisation or merger or subsidiarization with another PSE or for closure.
- DIPAM moves to CCEA for in-principle approval for the Strategic disinvestment of the CPSE.
- DIPAM appoints Transaction Advisors/Legal Advisor/Asset Valuers through tendering, with the approval of IMG.
- Further, a two-stage bidding process (EoI/RFP) is followed. In each stage, the process passes through IMG, CGD, and AM, which finally approves the disinvestment.
5. For CPSEs in non-Strategic Sectors:
The Department of Public Enterprises has prepared guidelines (13 December, 2021) to operationalize the New Public Sector Enterprise policy which inter-alia provides for the identification of the CPSEs either for closure or privatisation in the non-strategic sectors in consultation with the concerned Administrative Ministries/Departments, NITI Aayog, Department of Expenditure and DIPAM. The Department of Public Enterprises communicates to DIPAM the CPSEs approved for strategic disinvestment by CCEA as per the extant procedure.
