Govt looks to raise Rs 40,000 cr by Diwali via PSU stake sales

Written by fe Bureau | Updated: Aug 13 2014, 22:25pm hrs
The government is paving the way to raise about Rs 40,000-45,000 crore by Diwali to meet its ambitious FY15 disinvestment target of Rs 58,425 crore, with Coal India (CIL) and Oil and Natural Gas Corp (ONGC) touted among the first ones to hit the market, said three people familiar with the matter.

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The government has already cleared the way for ONGC's 5% stake sale and is in the process of appointing merchant bankers by August-end, instead of the earlier deadline of August 11. At the current market rate, the ONGC stake sale may fetch R17,350 crore to the exchequer.

In addition, the government has proposed to sell 10% in the world's largest coal producing company, CIL, which will help raise R23,000-odd crore at current rates.

If the government is successful with its disinvestment plan, it will have raised two-thirds of its target for the current fiscal.

The finance ministry raised its disinvestment target for the current fiscal to R58,425 crore, which includes R43,425 crore from selling stake in PSUs and another R15,000 crore from sale of residual stake in the erstwhile government companies.

The government is trying very hard to push ONGC and CIL stake sales first... Expect these two issues to hit the market after September if things appear favourable, said one merchant banker, requesting anonymity.

The government is also looking to raise an additional R1,800 crore by selling 10% stake in Steel Authority of India (SAIL) and R2,800 crore from an 11.36% stake sale in National Hydroelectric Power (NHPC).

Industry observers said the success of these four issues is very crucial for the government and its target to contain fiscal deficit to 4.1%. Pricing the issues is crucial for the government and offering a discount will attract retail investors in huge numbers, experts said.

PSU issues can be the instrument for reviving the sentiments. Retail investors should be offered a significant discounts, as it would mean sharing of public wealth with the public. It is intriguing why the last government was not keen on giving discounts to anonymous small investors but gave ONGC and Oil India a hefty 10% discount to buy 10% of its stake in Indian Oil, said Prithvi Haldea, CMD, Prime Database.

Experts also said the changes in offer for sale mechanism will aid the stake sale programme. Sebi recently tweaked OFS norms, reserving 10% of the offer size for retail investors and, additionally, providing shares at a discounted price.

There is great appetite in the market and sentiments have significantly changed after the outcome of the elections. Both providers and recipients of capital are a lot more positive. Also, the measures by Sebi, such as reservation and discount option for retail investors in OFS, will encourage more investments across investor categories in the equity markets, said Sanjay Bajaj, MD and head equity capital markets, HSBC Securities and Capital Markets (India).