Kelkar committee report

stock at Rs.350 within the time period by paying a premium of Rs.1 on that day. This
premium amount shall be collected from the investor and passed on to GOI on the next day.
If the investor does not want to exercise this option, the premium is forfeited. This process
can be repeated regularly (say each week).
The salient features of this proposal are: –
1. Provides an opportunity to sell regularly as against a large stake sale on a single day.
This is to address the issue of wide fluctuation in market prices arising out of
additional flow of liquidity in to the market and to avoid market price volatility, if
any.
2. Provides investors an opportunity to buy an option which can be exercised upon
favorable market conditions. This is to address the concern of investors that prices fall
after the issue is successfully completed.
3. Provides both the GOI and investors to realize at multiple price points as per the
prevailing market conditions. This is to address the issue of “a single day” liquidity
requirements faced by investors, single price based on that day’s market conditions
which may change over the period of time and freedom to exercise at varying prices
based on their assessment of market conditions.
4. Provides GOI an opportunity to decide on a price range within which it intends to
divest its holdings through a transparent process of the online stock exchange
mechanism. This is to address several issues – a. how a single price was determined b.
how the quantum of sale was determined at a single price and on only a given day c. if
the price was less than what it could have actually fetched etc.
ETF model
One of the purposes of divestment could be to broad base the shareholders and encourage
retail investors to participate. GOI may also like to sell all the stocks that it holds instead of a
select few. One of the proposals in this regard is creation of an “Exchange Traded Fund”
comprising of all the listed securities of CPSUs held by GOI. It is learnt that there are around
50 such securities. ETFs offer a number of advantages to the retail investors. The following
are some of the benefits:
1. ETFs provide the benefit of diversification to retail investors who cannot afford to use
their meager resources to acquire and hold a diversified portfolio
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