The Cabinet Committee on Economic Affairs (CCEA) will take up tomorrow the issue of ‘survivability’ of the call-option provision of shareholders’ agreement entered into at the time of strategic sale of central public sector undertakings during 2000-03.
A call option gives the buyer the right, but not the obligation, to buy a specific futures contract at a pre-determined price within a limited period of time, in accordance with a shareholder agreement. The span of time for which the option is valid can be referred to as the ‘survivability’ period.
State-owned firms like Videsh Sanchar Nigam Ltd (VSNL), Paradip Phosphates Ltd (PPL), and Jessop and Company were divested between 2000 and 2003. The matter was referred to a group of ministers after the Department of Disinvestment sought legal opinion on the issue.
The Centre at present owns a 26.1 per cent stake in VSNL, 26 per cent in PPL, and 27 per cent in Jessop & Co Ltd.
The issue came into prominence after Sterlite Industries, which bought 51 per cent of Balco, wanted to exercise its call option under the shareholders’ agreement and tried to buy the residual 49 per cent stake.
Showing posts with label Cabinet Commitee on Economic Affairs. Show all posts
Showing posts with label Cabinet Commitee on Economic Affairs. Show all posts
Thursday, May 17, 2007
PSUs likely to invest in MFs
The Cabinet Committee on Economic Affairs (CCEA) will discuss the proposal to lift the ban on state-owned companies from investing in mutual funds in its weekly meeting tomorrow.
This opens significant opportunities for cash-rich public sector units (PSUs) to earn higher returns and provide a fillip to the stock-markets. Mutual funds account for less than 1 per cent of total stock market investment.
According to data compiled by the Business Standard Research Bureau, the 78 listed public sector units had reserves worth Rs 3,04,292 crore at the end of March, 2006. Oil and Natural Gas Corporation (ONGC) with reserves of Rs 52,534 crore topped the list.
This is the second recent move by the government to strengthen PSUs. A month ago, it allowed the chairmen of such companies a role in the appointment of independent directors, also allowing them greater flexibility to make investment and operational decisions.
Read more in The Business Standard article.
This opens significant opportunities for cash-rich public sector units (PSUs) to earn higher returns and provide a fillip to the stock-markets. Mutual funds account for less than 1 per cent of total stock market investment.
According to data compiled by the Business Standard Research Bureau, the 78 listed public sector units had reserves worth Rs 3,04,292 crore at the end of March, 2006. Oil and Natural Gas Corporation (ONGC) with reserves of Rs 52,534 crore topped the list.
This is the second recent move by the government to strengthen PSUs. A month ago, it allowed the chairmen of such companies a role in the appointment of independent directors, also allowing them greater flexibility to make investment and operational decisions.
Read more in The Business Standard article.
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