Public sector undertakings Bharat Earth Movers (BEML), Rural Electrification Corporation (REC), Power Grid Corporation of India and National Hydroelectric Power Corporation (NHPC), slated to hit the market with their IPOs in the coming months, have begun the search for independent directors to ensure that the public issues do not face a regulatory hurdle.
This move was warranted after investment bankers had a bad experience when the public sector giant Power Finance Corporation launched their IPO on June 6, 2006.
The Securities Exchange Board of India (Sebi) had asked PFC to comply with norms applicable to independent directors.
It forced the company to appoint independent directors on its board -- IIM Indore director S P Parashar, IIM Bangalore director Prakash G Apte, former CMD of Eicher GroupS K Bhargava, consultant B K Mittal and former IDBI Chairman and Managing Director G P Gupta -- and refile its prospectus with the regulator.
Under the Clause-49 of the listing agreement, which came into effect from January 1, 2006, 50 per cent of the board of directors of a company are required to be independent in the event the company has an executive chairman (as in the case of public sector units).
The five IPOs, which are slated to hit the market before September, is targeting an amount of Rs 3,000 crore (Rs 30 lion).
"We know about the issue at the time of PFC's public offer. We don't want similar events to delay matters during the forthcoming IPOs by PSUs," an investment banker involved with one of the issues said.
"Clause-49 applies to all companies. The process (of appointing independent directors) have begun," he added.
After the proposed IPOs, the government share in REC would come down to 81.22 per cent while in PGCIL and NHPC it would be 86.36 per cent each. The three companies are now fully-owned by the Union government.