India approves stake sale in Shipping Corp

New Delhi (Reuters): India on Tuesday approved a 10 percent sale of government equity in state-run Shipping Corp of India Ltd and also allowed the firm to raise funds selling equal number of fresh shares.

The government plans to raise roughly $8.5 billion from share sales in 2010/11, part of a divestment programme in 60 state-run firms over next few years, as it looks to cut a stubbornly high fiscal deficit and raise spending on social welfare.

The government expects to raise about 13 billion rupees ($291 million) from the 10 percent stake sale in the firm. It currently owns 80.12 percent of Shipping Corp and its holding would come down to 63.75 percent after the share sale.

Shipping Corp, the largest shipping company in the country, could launch the follow-on share sale before December, its managing director told Reuters last week.  Shipping Corp, which has a market value of about $1.6 billion, has shortlisted SBI Capital, ICICI Securities and IDFC Capital as lead managers for the offer, three sources with direct knowledge of the situation said in August.

Retail investors would be given a 5 percent discount of the issue price, the government said.