Following the launch of initial public offering (IPO) of Hudco, after a five-year drought of PSU listings, the government is readying a series of IPOs by state-run firms. Hindustan Aeronautics(HAL), Cochin Shipyard, General Insurance (GIC Re) and New India Assurance (NIA) are among the firms that are likely to hit the market in the current fiscal.
The department of public asset management (DIPAM) is currently overseeing preparations including appointment of merchant bankers for listing of 10 to12 PSUs to ensure that a majority of these are listed by March 2018. “Preparations HAL and Cochin Shipyard IPOs are complete. They will hit the market anytime,” a senior government official told FE. The Centre will divest 10% each in HAL and Cochin Shipyard via the IPOs to raise nearly Rs 2,000 crore.
Bulk of the IPO proceeds, however, in the current fiscal are likely to come from country’s only reinsurer GIC Re and NIA, a leading general insurance company. The government could raise a total of about Rs 10,000 crore by selling 10% stake each in GIC Re and NIA. Besides government stake sale, the two insurance companies would also issue fresh equity to raise capital for their business expansion.
The Centre could generate between Rs 15,000-Rs 20,000 crore from IPOs alone this year to help meet an ambitious disinvestment target of Rs 72,500 crore. According to the procedures outlined by the DIPAM in February, a profitable PSU would have to list on the stock exchanges within 6 months, after the administrative ministry is on-board for the plan. Besides generating non-tax revenue for the government, the IPOs will help improve corporate governance in the PSUs.
“The government is highly resolved for listing of a number of PSUs this year,” another official said. In most of the identified PSUs, the government has already initiated processes such as appointment of merchant bankers and advisers for IPOs. Hudco IPO, which is now open for subscription till Thursday, has received a phenomenal response from both retail and institutional investors. It was subscribed 3-times by the end of day 2 of the 3-day subscription window.The government could raise around `1,200 crore from 10% stake sale in the company.
Prior to the Hudco IPO, the last PSU listing was in March 2012 when the government sold a 10% stake in NBCC for Rs 125 crore. According to available data, over 100 profitable PSUs are not yet listed on stock exchanges.