The government is looking at new ways to allot shares to employees of public sector companies in which the government plans to trim its stake through the offer for sale (OFS) route.
According to sources, the finance ministry has requested, the Securities and Exchange Board of India (Sebi), to have some provision for participation of employees in the newly-launched OFS and institutional placement programmes (IPP) mechanisms.
Unlike follow-on public offerings (FPOs), which have one per cent of the issue reserved for employees, OFS and IPP are open for all investors, without any specific reservations.
The government stumbled upon the need for reserving shares for employees divesting shares in NMDC. Also, as it prepares for the forthcoming big-ticket disinvestments in SAIL and NTPC, it wants a provision to allot shares to employees who would like to participate in the disinvestment.
Sebi, however, is not very keen on introducing an employee quota' for share-sales done through OFS and IPP.
Instead, the regulator has suggested the government allot shares to eligible employees through preferential allotment, spot contracts or employee stock option plans after the OFS issue, according to people in the know. Under a spot contract, which is transfer of securities by the depository from the account of a beneficial owner to the account of another beneficial owner, the regulator has prescribed that shares can be given to employees at a discount but the payment has to come within 48 hours.
But any such allotments can only take place after a period of 12 weeks from the day of OFS. According to regulations, a promoter is not allowed to purchase or sell shares of the company for a period of 12 weeks before and after an OFS or IPP offer.
Before the introduction of the OFS and IPP routes for share-sales, the government predominately used the FPO route while divesting in listed companies, which allowed participation of employees.
Most government FPOs in recent years had about one per cent of the issue reserved for employees and shares were allotted at a five per cent discount to the issue price.
For instance, during the 2010-11 disinvestment programme, the government divested its holding in companies, including Engineers India, Power Grid Corporation and Shipping Corporation of India through FPOs, which had reservation and discounts for employees. The government, so far, has sold shares in companies, including ONGC, Hindustan Copper and NMDC through the OFS route.