Initial Public Offering and Partial Divestment of Government Shares Sample Clauses

Initial Public Offering and Partial Divestment of Government Shares. As per the decision of the Cabinet Committee on Economic Affairs in November 2006, the Government has decided to (i) issue shares to the public in three public-sector power companies (POWERGRID, the Rural Electrification Corporation and the Power Finance Corporation) up to 24% of their paid-in capital and (ii) to divest itself of 5% of its shares in the companies. POWERGRID invited bids for its initial public offering up to 10% of its paid-in capital between 10 and 13 September 2007. The divestment of the Government shares was planned simultaneously. These actions have diluted Government ownership in POWERGRID from 100% to about 86.4%. This is a positive step in POWERGRID’s corporate governance reform program, as it will encourage further disclosure of financial information to shareholders, investment professionals, and the general public. Public listing creates regular market information on commercial performance and monitoring by a separate class of shareholders other than the Government (because shareholders have a residual rather than priority claim on the firm’s assets, the value of minority shareholders’ investments in the utility depends more strongly on performance of the utility compared with the lenders). POWERGRID has received enormous response from the bidders in all categories. Massive positive market response to the share issue has reflected POWERGRID’s existing corporate governance practices and demonstrated confidence in the company going forward on a commercial basis.