Central

Section 4 of The Tyre Corporation of India Limited (Disinvestment of Ownership) Act, 2007

The Central Government may, in its order made under section 2, specify that disinvestment of shares shall be effected by one or more of the following methods as may be specified in such order, namely:--

(a)by making a public offer or preferential allotment or private placement in accordance with such procedure as applicable in case of any other Government company;
(b)by directing the company to make further issue of equity capital to the members of the public or preferential allotment or private placement, as the case may be, in accordance with such procedure as applicable in case of the Government company.

Summary

The Central Government must specify how the disinvestment will happen inside the official order passed under Section 2.
The government can choose one or more different methods to sell or transfer the shares.
The first method is for the government itself to make a public offer, a preferential allotment (selling to a specific group), or a private placement (selling directly to selected investors), following the same rules that apply to other Government companies.
The second method is for the government to direct the company itself to issue more equity capital (new shares) to the general public, or do a preferential allotment or private placement, using standard Government company procedures.

Practical examples

1In November 2008, the Central Government issued an order under Section 2 deciding to sell shares via a public offer. The government advertised the shares to regular citizens across India, following the standard regulatory procedures used for other state-owned firms.

2In June 2010, the Central Government directed the company to raise new capital by issuing fresh equity shares to a specific group of institutional investors through a preferential allotment. This private placement was carried out using standard government company guidelines.

FAQ

1. In which document does the Central Government specify the method of disinvestment?

The method is specified in the order made under Section 2 of the Act.

2. What are the specific methods of disinvestment mentioned in clause (a) of Section 4?

The methods are making a public offer, a preferential allotment, or a private placement.

3. Under clause (b), who can the government direct to issue new equity capital?

The government can direct the company itself to make the further issue of equity capital.

4. What procedures must be followed when carrying out these disinvestment methods?

The procedures followed must be those applicable in the case of any other Government company.

Test yourself

Q1.Under which section's order does the Central Government specify the manner of disinvestment?

Q2.Which of the following is NOT a method of disinvestment listed in Section 4?

Q3.Under Section 4(b), who does the Central Government direct to make a further issue of equity capital?

Q4.What rules or procedures must be followed when making a private placement under Section 4?

Q5.How many disinvestment methods listed in Section 4 can the Central Government combine in its order?

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Central

Section 4 of The Tyre Corporation of India Limited (Disinvestment of Ownership) Act, 2007

(a)by making a public offer or preferential allotment or private placement in accordance with such procedure as applicable in case of any other Government company;
(b)by directing the company to make further issue of equity capital to the members of the public or preferential allotment or private placement, as the case may be, in accordance with such procedure as applicable in case of the Government company.

Summary

The Central Government must specify how the disinvestment will happen inside the official order passed under Section 2.
The government can choose one or more different methods to sell or transfer the shares.
The first method is for the government itself to make a public offer, a preferential allotment (selling to a specific group), or a private placement (selling directly to selected investors), following the same rules that apply to other Government companies.
The second method is for the government to direct the company itself to issue more equity capital (new shares) to the general public, or do a preferential allotment or private placement, using standard Government company procedures.