Thursday, 24 July 2014

Govt's stake sale plans set for a Diwali boost

The government's disinvestment programme is set to get a boost this , with the finance ministry planning to hit the market to sell a five per cent stake in Steel Authority of India Ltd () by October. This will be followed by a 10 per cent stake dilution in .

Apart from these two, the department of disinvestment has identified about a dozen other companies in which the government could offload shares this financial year. Since disinvestment in all identified public-sector undertakings (), except SAIL, is likely to begin from October, the government might have two issues on an average every month to meet its target of raising Rs 58,425 crore through stake sale this year.

Disinvestment in Coal India, the biggest issue of the year, is likely to fetch the government Rs 24,258 crore at the current market price. SAIL could add another Rs 1,800 crore to the government kitty.

"One or two big-ticket issues could come by October. SAIL will be the first to hit the market, followed by Coal India, and then the rest," said a finance ministry official who did not wish to be named.

In the pipeline to go next for stake sale could be  Corp, Rural Electrification Corp, Tehri Hydro Development Corp () and SJVN. Among other issues likely to tap the market this year are NHPC, CONCOR, MMTC, NLC and MOIL. Most of the disinvestment will take place through the offer-for-sale (OFS) route. Besides THDC, there will be two more IPOs -for HAL and RINL.

Another big-ticket issue, of , is likely to make the exchequer richer by Rs 17,329 crore; this might take time as the firm has asked the government to resolve some issues before going for disinvestment.

The ministry official quoted earlier said all issues at Coal India had been sorted out and the government would be able to convince ONGC. too. He added the government might not get more than Rs 35,000 crore from both coal India and ONGC together, as the actual proceeds were expected to be lower than the current market valuation.
"A Cabinet note has already been floated for stake sale in many of these firms. Once the approval of the Cabinet Committee on Economic Affairs is obtained, road shows will be conducted," the official added.

All these are expected to fetch a combined Rs 36,925 crore to the government this year. Also, it has projected Rs 15,000 crore from sale of its residual stake in Hindustan Zinc and Balco, and another Rs 6,500 crore from sale of Specified Undertaking of the Unit Trust of India's (Suuti's) stake in private companies.

If the first disinvestment of 2014-15 happens in October, the government will have to raise an average Rs 9,737 crore from the market every month. Since there are concerns of crowding of many issues in the second half, the ministry is trying to "space these out". The government will also offer discounts to retail participants to encourage their participation.

SAIL, NHPC, MOIL and CIL will also help the government meet the Securities and Exchange Board of India (Sebi) requirement of having a 25 per cent minimum public shareholding within three years. There could also be some other companies where the government might dilute its holding this year, as there are more than 30 companies where it is required to bring its stake down to 75 per cent over three years.

Last year, the government could raise only Rs 25,841 crore, against the original plan of Rs 55,814 crore. A year before that, the actual mop-up was Rs 25,890 crore, compared with the Budget estimate of Rs 30,000 crore.

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