EGoM defers March 14 MMTC stake sale on valuation concerns

A government panel has deferred the proposed 9.33 per cent stake sale in state-owned MMTC on concerns over valuation of the company's equity.

The issue was originally planned to hit the markets on March 14.

The Empowered Group of Ministers (EGoM) on disinvestment, headed by Finance Minister P Chidambaram, was slated to decided on the base price of the stake sale on Tuesday.

"MMTC issue has been deferred for now... EGoM did not accept recommendations of merchant bankers on valuation issues," Disinvestment Secretary Ravi Mathur said after the meeting.

The Department of Disinvestment (DoD) has shortlisted three investment bankers - Avendus, IDBI Capital Market Services and IDFC - for selling over 9.33 crore shares, or 9.33 per cent, of its stake in MMTC in the current fiscal through an Offer For Sale (OFS).

Since the public float of the company is very less, sources said the merchant bankers had a tough time in evaluating the share sale price which will be acceptable to investors.

The government was expecting to raise Rs 250-300 crore through the stake sale, which would have enabled the company meet minimum 10 per cent public holding norm stipulated by the Securities and Exchange Board of India (Sebi).

At present, the government holds 99.33 per cent shareholding in MMTC.

The DoD has initiated the process of investor meet for selling shares in the 'Miniratna' PSU, whose current public float is very less and hence the market valuation is too high.

The roadshows for the stake sale were held in Mumbai and Pune.

Mathur, however, did not say as to when the EGoM would meet next to decide on the MMTC stake sale. According to sources, the sale is likely to be shifted to the next financial year, beginning April 1.

MMTC's market capitalisation is Rs 28,600 crore, of which the public free float is worth about Rs 1,430 crore.

The stake sale would have helped the government inch towards Rs 24,000 crore disinvestment target as per revised estimates, lower than Rs 30,000 crore as estimated in budget for 2012-13.

With inputs from PTI