There is a need for simplifying the pricing mechanism in the offer-for-sale route while divesting stakes in state owned companies, Divestment Secretary Ravi Mathur said today.
The problem is around "double pricing" and the government is keen to iron it out with the market regulator Securities and Exchange Board of India (Sebi), Mr Mathur said at an investment summit organised by industry body IMC here.
"The divestment department is open to discuss with Sebi whether we can come out with some better mechanism that has an element of surprise and can prevent the double-price discovery method," he said.
Double pricing in the offer for sale (OFS) route, he said, refers to the one determined by the empowered group of ministers (EGOM) and the other by the market.
The OFS price, which has to be declared after trading hours on the day before the issue, is decided by the EGOM two days in advance when it meets to consider whether to go for an OFS and tranches, he said.
However, trading on a particular scrip continues for two sessions before the OFS and hence, one is left with the scenario of two prices -- one set by the EGOM and the other discovered by the market, he added.
"Accordingly, there may be an occasion when the price in the market may go below the floor price set by the EGOM. These are challenges we face in the OFS mechanism," Mr Mathur said.
It can be noted that through the OFS route, government raised about Rs 18,000 crore in the final three months of past fiscal year, as a part of its divestment programme, which fetched nearly 24,000 crore in total.
On new divestment target of Rs 54,000 crore this fiscal year, he said the department will try its best to achieve it.
For FY14, the government is also aware that it needs to dilute up to 10 per cent equity by August in many listed entities to comply with the Sebi's minimum public holding norms, he said.