Even as big-ticket PSU stake sales may be on hold till markets stabilise, the department of disinvestment (DoD) is hard-selling these issues with long-term foreign investors from geographies that have hitherto been largely off the map.
In line with a shift in focus from foreign institutional investors (FIIs) to more durable investors, a team of Indian officials led by disinvestment secretary Aradhana Johri met officials from top Canadian pension funds and their managers in roadshows held in four cities of the North American country between September 7 and 11. During the whirlwind tour of Canada, the officials met CEOs of the $123-billion British Columbia Investment Management Corporation and senior executives of $155-billion The Ontario Teachers’ Pension Plan, among others.
“Canadian pension funds, certainly a couple of large investors, are willing to invest in the stocks of Indian companies,” one of the officials who participated in the roadshows said.
The one-on-one meetings with leading Canadian pension funds were focused on the scheduled stake sales in energy-sector PSUs Coal India and NTPC as well as infrastructure companies like Container Corporation (Concor). Johri updated the investors about the Indian economy, seen by many as one of the bright spots in the world economy due to its strong fundamentals and potential to grow faster. Besides Johri, senior officials from Coal India and Concor answered investor queries on economic reforms as well as pending concerns over regulations and governance in India, the sources said.
In the first half of FY16, the DoD has managed to sell stakes in four companies to raise about Rs 12,600 crore, the best showing in seven years, but has a long way to go to meet the ambitious disinvestment target (PSU and non-PSU) of Rs 69,500 for the full year. The department has lined about 20 PSUs, including a 10% stake sale in Coal India, which alone could fetch about Rs 21,000 crore at current market prices.
Besides the steps taken to increase domestic retail investor participation, the DoD is now setting its eyes on long-term investors, who it reckons could bring stability into the equity market. Prior to Canada, the DoD also held roadshows in another non-traditional market, Australia. Pension funds in Canada and Australia, which rank third and fourth respectively in terms of size of their retirement funds in the world, have not been very aware of opportunities in India.
“There is a need for sustained follow-ups before you can convert the potential (of long-term investors from non-traditional geographies to invest in India) into actual investments,” the official quoted above added.
While Indian missions will do their bit, the DoD has asked Deutsche Bank, which managed the roadshows in Canada, to set aside a sales person to specifically follow up in Canada. Similarly, Citibank has been assigned to keep updating Australian investors about the Indian economy and stocks on a regular basis. Complementing the DoD’s efforts, finance minister Arun Jaitley also held two meetings with long-term investors in Singapore and Hong Kong during his visit on September 18-21.
Market making is the new mantra for the DoD, especially after the setback it received in the disinvestment in Indian Oil Corporation, a relatively robust stock. The government-owned Life Insurance Corporation had to be roped in to buy about 87% of the offer for sale of shares worth Rs 9,300 crore in IOC on August 24. As the issue happened on a day of very high volatility, FIIs largely stayed away from the stock.
* Long-term foreign funds could play a larger role in PSU divestment; this would reduce market volatility ascribed to FII moves
* Team headed by DoD secretary met Canadian funds such as British Columbia Investment Management & The Ontario Teachers’ Pension Plan earlier this month
* Deutsche Bank asked to have a sales person in Canada while Citibank will have one
in Australia to follow up with the potential investors