The centre has prepared to listed up a series of stake sales by November end, as it aims to exceed the FY19 disinvestment target of Rs 80,000 crore. The window is critical for stake sales as markets could become fevered in the fourth quarter of FY19, ahead of general elections in April-May. Only Rs 9,220 crore or a little over 11% of the annual disinvestment target achieved so far.
The Centre is banking on minority stake sales in PSUs such as ONGC and Coal India, a further fund offer under the existing CPSE-ETF, buybacks by a group of firms, monetization of a portion of SUUTI holdings in Axis Bank and ITC, and strategic sales of some relatively smaller companies.
Later this month, a listing of Ircon International and Garden Reach Shipbuilders will materialize as many IPO’s are also being planned. Last year, the Centre was in a comfortable position on the disinvestment front by this time.
By August 2017, it was assured of receipts of Rs 55,335 crores – Rs 18,420 crores was already realized and Rs 36,915 crore was assured with ONGC agreeing to buy the government’s 51% stake in HPCL. The Centre ended up collecting the larger ever disinvestment revenue of Rs 1 lakh crore in FY18, against a target of Rs 72,500 crore.
On Sunday, finance minister Arun Jaitley after a meeting on the economy and the central budget chaired by prime minister Narendra Modi said,” Just as we exceeded the target last year, we are confident of not only maintaining the disinvestment target this year but (receipts) may perhaps be in excess”.
“We will try to achieve the target. Disinvestment will continue till March 2019 through OFS, buybacks, strategic sales and IPOs”, he said.
The government will likely sell a 5% stake each in ONGC and Coal India, which could bring about Rs 11,000 crores and Rs 8,900 crores, respectively, at current market prices. These could be through offer for sale or block deals. Recently, it held roadshows in the US, the UK, Hong Kong, and Singapore for CIL, and in the US for ONGC to gauge investor appetite. Besides these two heavyweight stocks, the Centre has listed up an offer for sales in about a dozen other PSUs, including HUDCO, NBCC, and Bharat Electronics.
In the past 2 years, Exchange traded fund (ETF), which has emerged as a successful tool to disinvestment stocks. It would be used to wash up some Rs 6,000 crores through a further fund offer of the CPSE ETF.
The Centre could monetize a part of SUUTI holding in Axis Bank and ITC, with options of big deals limited in the remaining part of the year. Its 7.95% stake in ITC is worth Rs 30,340 crores and 9.63% stake in Axis Bank is worth Rs 15,811 crore at current market prices.
In the fourth quarter of FY19, buyback of their own shares by PSUs could be used widely. It could happen when the transactions could slow down due to upcoming elections. Like in FY17, when it raised about Rs 18,963 crores through buybacks, it hopes to raise a considerable amount through this route in FY19 as well. About a dozen firms have been marked as potential candidates including NTPC, NALCO, and NMDC, NLC, BHEL, NHPC, NBCC, and SJVN. If stake sales in ONGC and Coal India don’t materialize, these two PSUs could also be asked to buy back their shares.
This year, DIPAM is confident of executing 4-5 strategic sales including Pawan Hans and Project & Development India. The Centre will keep the spending momentum ahead of elections and options to exceed tax revenues are limited, a sale similar to ONGC-HPCL deal last year can’t be ruled out either. Disinvestment revenue is critical to containing fiscal deficit at the budgeted level of 3.3% of GDP this year.
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