The government is considering alternatives, including the buyback route, to disinvestment in steel giant

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SAIL as the market conditions are not conducive to a public issue.

Under the buyback mode, the government can raise money by selling its equity in the company to the PSU itself.

As part of efforts to achieve the mammoth Rs 40,000 crore disinvestment target, the Department of Disinvestment (DoD) has prepared a list of cash-rich PSUs which can buyback government equity. SAIL is among the companies on the list.

"The government is exploring routes other than FPO for stake sale in SAIL. It will happen only in the January-March quarter," a senior official said, adding that it could be through the buyback route though it has not been finalised.

Last month, the government had said it will go ahead with its proposal to offload 5 per cent stake in the firm even as the company had decided against issuing fresh equity.

The government holds 85.82 per cent in the 'Maharatna' company. SAIL share was at Rs 82.20 on the BSE on Friday.

The company's Follow-on Public Offer (FPO) has failed to meet deadlines repeatedly since December 2010, due to several reasons such as rising coking coal prices, problems with merchant bankers and adverse market conditions.

The scrip has more than halved since January, when it was trading at Rs 188 on the BSE.

"We cannot sell SAIL at Rs 80. It is totally undervalued. We are exploring options," the official said, adding the DoD will go to cabinet with different options.

The government has been thinking of raising funds through the buyback route as it has not been able to raise money through sale of equity in public sector units on account of uncertainty in the stock markets.

Although the government has plans to raise Rs 40,000 crore from disinvestment in the current fiscal, it has not been able to make much headway because of uncertain market conditions.

So far, it has raised only Rs 1,144 crore (Rs 11.44 billion) from stake sale in Power Finance Corporation (PFC).

It has filed draft papers with Sebi for the FPO of BHEL but volatile market conditions are delaying the government's disinvestment plans.

Global equity markets have been on a downside on persisting debt troubles in the euro-zone and fears of a slow down in major global economies, particularly the US.

Last fiscal, the government had raised Rs 22,763 crore through the disinvestment.