Corporate Finance

Methods of disinvestment

Pricing

Target investor

Transaction cost

Time involved

Regulation

Precedents

International

Valuation by inter-

Essentially foreign

High, in

the range

3–4 months

Disclosure

VSNL,

offering

national qualified

institutional

of 4–5

percent

requirements by

MTNL,

institutional buyers

investors

depending on

Securities

Exchange

GAIL

(QIBs) (through book

the size of the

Commission (SEC)

building) and related

issue

and accounting in

to domestic

accordance with

market prices

the US GenerallyAccepted AccountingPractices (GAAP)for ADRs, NASDAQ/NYSE/ LSE listingrequirements

Private placement

Valuation by

Essentially insti-

Low

1–2

months

Foreign

investment

CONCOR,

of equity

merchant banker

tutional including

guidelines in case

GAIL

and feedback from

multilateral agencies,

of overseas investors

(Domestic

institutional

private

equity funds

issue with

investors or price

FIIs’

discovered through

participation)

book building.

Auction

In case of Dutch

Essentially

Low

1–2

months

SEBI take-over

Initial 9

rounds

auction, allotments

institutional

code

of

made at single

disinvestment

price. In case ofFrench auction, allot-ments made at bidprice.

Strategic sale

Optimization through

Investors with

Low

6–10 months

Companies Act, SEBI

MFIL,

BALCO,

competitive tension

strategic fit—

Take-over code, stock

CCI

and control premium

techno-com-

exchange, RBI

(Yerraguntla

commercial

unit), VikrantTyres, OPGC,etc.