Despite missing the strategic disinvestment target of R20,500 crore by a big margin in FY17, finance minister Arun Jaitley on Wednesday announced that the government intends to raise R72,500 crore in FY18 through disinvestment.
Of this, the government said it intended to raise R46,500 crore through disinvestment, R15,000 crore through strategic disinvestment and R11,000 crore through the listing of insurance companies. “Listing of public sector enterprises will foster greater public accountability and unlock the true value of these companies,” Jaitley said in his Budget speech, adding that the identified names include insurance companies and three railway PSUs – IRTCTC, IRFC and IRCON.
Jaitley seemed to have been buoyed by the success of the recent further fund offering (FFO) of the CPSE ETF that was oversubscribed 2.30 times, with bids worth R13,802 crore pouring in for an issue size of R6,000 crore. “Our ETF, comprising shares of ten CPSEs, has received overwhelming response in the recent Further Fund Offering (FFO). We will continue to use ETF as a vehicle for further disinvestment of shares,” Jaitley added.
Market participants FE spoke to said that while ambitious, the government won’t find it too difficult to raise the targetted amount. “I think given the buoyancy in the market, it won’t be too difficult to achieve these targets. In fact, I would even say that by and large the targets are pretty conservative,” Madhu Kela, chief investment strategist at Reliance Capital, said.
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Kela added that if the strategic disinvestment would include the government’s residual stakes in Balco and Hindustan Zinc as well, then achieving the targets would be even more easy. Sharing similar sentiments, Rashesh Shah, chairman of the Edelweiss Group, said “I think the market will be able to absorb the government’s disinvestment. One of the reasons the government didn’t tinker too much with the capital market is also because it wants to keep it as stable as possible.”
By Sundar Sethuraman