1. Disinvestment: Govt eyes fatter share sale kitty in 2015; gets Rs 18k cr in 2014

Disinvestment: Govt eyes fatter share sale kitty in 2015; gets Rs 18k cr in 2014

It began with a bang, turned into a whimper soon and bounced back again in the end...

By: | New Delhi | Updated: December 16, 2014 3:14 PM
The end of the year saw some success and sale of shares in steel giant SAIL got a robust response and was billed as 'SAIL's super sale' by market watchers. Reuters

The end of the year saw some success and sale of shares in steel giant SAIL got a robust response and was billed as ‘SAIL’s super sale’ by market watchers. Reuters

It began with a bang, turned into a whimper soon and bounced back again in the end, but sale of shares — in PSUs and a private sector firm — still fetched the government little over Rs 18,000 crore in 2014.

Still, a record-breaking stock market rally seems to have largely bypassed the government’s disinvestment plans to raise funds from part sale of ‘family silver’ in 2014, as the proceeds fell by almost one-fifth from over Rs 22,000 crore garnered during the previous calendar year.

The new year 2015, however, may see shares worth over Rs 50,000 crore being put on the table by the government, including by way of part-sale of its holdings in PSUs and its residual minority stakes in some private sector entities.

“You don’t sell family silver in a scrappy market unless there is a distress,” a senior official said, while explaining the disinvestment programme during the year passing-by.

The stock market may have reached new record highs, but there was too much volatility and occasions were rare to get the right price for offloading shares in such prized assets as PSUs, he said, while adding that the government is hopeful of better days ahead in 2015.

A top banker, who has advised on some PSU share sales, said the government’s disinvestment programme in 2014 began on the right note, but lost track within a few months.

The end of the year, however, saw some success and sale of shares in steel giant SAIL got a robust response and was billed as ‘SAIL’s super sale’ by market watchers.

Within the first three months of 2014, the government managed to raise Rs 7,725 crore through share sales in just three PSUs — Engineers India Ltd, BHEL and Indian Oil.

This was topped by realisation of Rs 3,000 crore as disinvestment proceeds through a newly created CPSE Exchange Traded Fund that comprises of shares of listed CPSEs in March.

The same month also saw garnering of Rs 5,557 crore through part sale of shares in private sector lender Axis Bank, held through a special purpose vehicle SUUTI.

Together, the government managed to raise over Rs 16,000 crore in first three months from sale of shares, but this was followed by a long slump and the funds garnered during the next eight months was a meagre Rs 52 crore — that too through employee share offers in NTPC and National Fertilisers Ltd.

The last month of the year, however, saw the government raising little over Rs 1,700 crore through an offer for sale in SAIL, ending the year with total funds of Rs 18,059 crore.

Overall, the government managed to sell shares in six PSUs and one private sector, besides through one multi-share ETF, during 2014. In comparison, the government sold shares in 13 companies during 2013, taking its total disinvestment proceeds that year to Rs 22,144.60 crore.

Encouraged by good response to SAIL stake sale, the government, however, now plans to aggressively pursue its disinvestment strategy in 2015 to pare its holding in state- run companies, including ONGC and Coal India.

In the process, it faces a daunting task of meeting Rs 43,425 crore target for the current financial year that ends in March 2015, as against total proceeds of less than Rs 1,800 crore collected so far in this financial year.

In addition, it is also targetting Rs 15,000 crore for sale of residual stakes in private companies in this fiscal.

“We will not sell our crown jewels at a lower price. We will garner as much value as we can when we sell equity in these companies,” a top government official said.

Hammering of the stock price as soon as the disinvestment is announced remains a worry for the Department of Disinvestment, which comes under the Finance Ministry and oversees monetisation of the government holding in PSUs.

“We are evaluating if we can secure cabinet approval for selling stake in PSUs and do the roadshows. Then we can hit the markets as and when we see the scrip has stabilised and can fetch exchequer good returns,” the official added.

The DoD is working overtime to decide on the state-run entities which could fetch the best returns to the exchequer and has lined up as many as 10 companies for paring government equity.

Keeping retail investors in mind, the government has doubled quota for such investors in Offer for Sales to 20 per cent. Retail investors can invest up to Rs 2 lakh in a share issue and also get a price discount of 5 per cent.

The new quota is likely to be applicable in the upcoming OFS of bluechip PSUs like the ONGC and Coal India, which are likely to hit the markets in January-March quarter of 2015.

While a 5 per cent stake sale in ONGC could garner around Rs 17,000 crore to the exchequer, another Rs 20,000 crore is likely to come from 10 per cent stake dilution in Coal India.

Government, which holds 68.94 per cent stake in ONGC, is selling 5 per cent of its holding. It has already completed the roadshow of ONGC in countries like Singapore, Hong Kong, London, New York and Boston.

The government had last sold 5 per cent stake in ONGC in 2012 for Rs 14,000 crore. Country’s largest insurer LIC had then come to its rescue putting in over Rs 12,000 crore and picking up 95 per cent of the total shares on the block.

The other companies which are on the government agenda for stake dilution include 10 per cent stake in Hindustan Aeronautics. Also 10 per cent in Satluj Jal Vidyut Nigam and MOIL are on the cards. A 5 per cent each in Container Corporation of India, PFC and REC are also on the table.

The only silver lining in the disinvestment programme between April-December was that the retail investors have shown much interest in buying the PSU shares.

The response of retail investors to PSU disinvestments had not been encouraging in the past with the 10 per cent reserved quota barely managing to get fully subscribed.

In early 2014, the government sold 10 per cent stake in Indian Oil in an off-market transaction. State-owned ONGC and Oil India bought 10 per cent government stake in IOC. Also government sold 5 per cent in BHEL through a block deal to state-owned LIC.

The concept of CPSE Exchange Traded Fund saw a successful start as investors lapped up units offered under the ETF.

The government also sold 9 per cent stake in Axis Bank, held through SUUTI, which was formed in 2003 and is an offshoot of erstwhile UTI.

SUUTI still holds 11.72 per cent stake in Axis Bank, besides 11.27 per cent in ITC and 8.18 per cent in L&T.

As the year draws to a close, the Finance Ministry is still staggering to raise the budgeted Rs 15,000 crore through residual stake sale in Hindustan Zinc and Balco.

The government, which currently holds 29.5 per cent stake in HZL and 49 per cent stake in Balco, is looking at exiting the two firms in which Anil Agarwal-led Vedanta Group holds the majority stake. The government had sold controlling stake in these companies between 2001-2003.

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  1. H
    Harry Potter
    Dec 17, 2014 at 9:20 pm
    Dear Investor - Watch Out - Careful!!L&T top-bres were on selling spree March-2014, leading the pack Chairman Mr Naik sold his L&T shares (Rs 1200 apiece) worth 70 crores in 20 days - March 2014. Post Q1-2014 results L&T share has seen biggest intraday decline of 8 % since July 2009, Citi Group had raised multiple red flags on earnings. Hydrocarbon subsidiary suffered losses of 900 crores, sans stake at Dhamra Port (2500 crores) L&T would have posted losses. Modi Euphoria and upbeat in market saved L&T going below Rs 1300 during q2, a striking closed range of 1200 of March 2014. Part stakes at L&T Inra sold to Canadian FII - (2000 crores). Asking for VGF (Viability Gap Funding) of 3000 crores for Hyderabad Metro. Stake or post losses, Deep Sea or devil? Post Q2 results L&T share plummeted from high of 1673 to low of 1450 (17 Dec, 2014). Before Q3 results it will reach range of 1200 a piece, the rate L&T top bres has made a kill. Post Q3 results another big intra-day fall of 8-10 %, decline to 52 week low of 900. By Feb(end)-2015 no wonder, 5 year low of Rs 600 a piece? Watch Out!!Biggest shareholders at L&T, state owned LIC/UTI. Ministry of Corporate Affairs, PM Mr Modi, LIC/UTI should intervene NOW - to fix retirement age at L&T to 60!! -----------------Infosys BPO entire top-deck got sacked for failing to comply with the company’s code of conduct. Any CXO/MD level official ever got fired in last 5/10 years or resigned on morals grounds? Please refer TOI article – “whistleblower was right: CBI”. Excerpts – “Golden Quadrilateral Project -- M/s LnT had misrepresented the facts”. BS Article – “Rajya Sabha nods for whistle blowers bill” – excerpts – “Prasad recalled the sacrifice of Satyendra Dubey, an Indian Engineering Service officer who was killed after he tried to reveal corruption in the Golden Quadrilateral”. Please GOOGLE – white collar criminal equivalent of rape and murder- “Cl Action Suit Seeks $100 Million for Pregnancy Discrimination, Other Violations”. Please refer International Business Times article – “$100 Million Sought as New Discrimination, Immigration Violations Complaint Filed against LnT”. Got slapped with ban by World Bank – please refer ET article – “World Bank bars LnT for 6 months over forgery”. Biggest shareholders at L&T, state owned LIC/UTI. Ministry of Corporate Affairs, PM Mr Modi, LIC/UTI should intervene NOW - to fix retirement age at L&T to 60!!--------------------------------------------------Expensive CXO Maha-Kumbh Mela at L&T - what is the number of CEOs at LnT and all its subsidiaries (138), their CTC? How far higher, this is to manage L&T group revenues of $a4 bln than Mr Sikka (aged 46) of Infosys highest paid professional CEO (Rs 30 cr) in India, entrusted with business $ 8 bln in revenues and 1.6 lakhs employees. At L&T, just Chairman Mr Naik (aged 72) and group CEO Mr Vankatraman are pegged at 21 and 14 crores. L&T Infotech - 2 CEOs (left Oct-2014, now looking for two new), 1 COO (Infy CEO Contender. 1 CEO for L&T Tech Services. Infotech is claiming to touch $1 bln revenues since 2010, still not there. Information Age leaders, top-man of TATA, Infosys, Microsoft are in their 40s, why this super 70s at L&T? Chairman Mr Naik’s jaw-dropping musings on succession – “You find a man in the world who will kill himself four times a day, has worked for more than a hundred years-- There is no such person.-- None of us here (at senior level) are working for money”. Biggest shareholders at L&T, state owned LIC/UTI. Ministry of Corporate Affairs, PM Mr Modi, LIC/UTI should intervene NOW - to fix retirement age at L&T to 60!!
    Reply
    1. Sakshi Chopra
      Dec 16, 2014 at 3:54 pm
      News portal with breaking latest news, visit: :vishwagujarat/en/
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