Government’s disinvestment kitty has almost doubled this year with over Rs 35,000 crore garnered through PSU share sales, but not without the help of its all-time saviour LIC, while a strong pipeline is ready for 2016 with bluechips like NTPC, Coal India and ONGC.
At a record high of Rs 35,236 crore (USD 5.3 billion), the total funds collected by the government through part-sale of its stake in the ‘family silver’ PSUs during 2015 marks a huge jump from about Rs 18,000 raised in the previous year.
The disinvestment proceeds stood at about Rs 22,000 crore in the year 2013.
Targetting at least Rs 50,000 crore of funds from sale of the ‘family silver’ PSU shares in 2016, the government will look for right market conditions and positive global cues to resume its disinvestment drive in the new year as it looks to garner the much-needed resources to meet the deficit targets.
The trends in the crude and metal prices would however hold the key as the planned portfolio for the new year largely comprises of commodity stocks.
Disinvestment Secretary Aradhana Johri said that her department is ready with the 2016 “pipeline” of bluechip stocks like Coal India, ONGC, NTPC, BHEL and NMDC.
“We have brought about changes in the way we do business. We are ready to hit the market at short notices as and when window opens,” Johri told PTI.
“We have created a ready pipeline which we can tap into depending on market conditions,” she added.
The Department of Disinvestment has been pitching hard for cutting down the ‘notice period’ for launching the share sale in an already-listed PSU stock to just one days, but the markets regulator Sebi has refused to budge on this as it wanted the retail investors to get sufficient time to ready for a share sale offer.
Sebi has agreed to trim down the window from ‘two trading days’ to ‘two banking days’ — a move that has led to many PSU disinvestments taking place on Mondays.
Retail public investors, who were supposed to be the core constituency of the disinvestment exercise, however continue to remain away from most of the offers. The success of many PSU disinvestments continue to hinge on help of the state-run insurance behemoth LIC although, the foreign roadshows by the government helped attract some overseas investors in 2015.
The government is also placing its bets on some strategic disinvestment transactions, but not a single proposal could see light of the day in 2015 while the proposed residual stake sales in HZL, Balco and SUUTI were also taken off the list.
In all, the government sold minority stakes in five PSUs, including Coal India and Indian Oil Corporation, to mop up Rs 35,236 crore in 2015.
This is the highest ever collection in a single calendar year even though the markets were challenging, Johri said.
Global cues made the market little challenging, but despite that we have raised not only the highest ever (amount for PSUs) but in terms of total issuances in the market, the public and private sectors included, the public sector has far outscored the private sector.
“We are about 12-13 per cent of the total market cap, but … we have done over 70 per cent of the total fund raising,” Johri told said.
The total equity funds raising via Initial Public Offers (IPO) and Offer for Sale (OFS) in 2015 amounted to over Rs 48,700 crore. Of this, OFS by PSUs accounted for Rs 35,236 crore, which is about 73 per cent of the total fund raising.
The earlier dispensation that required an advance notice of two trading days before the launch of OFS allowed speculators to beat down the price, often leading to lukewarm response and state-owned LIC being summoned to rescue it.
However, a shorter window can result in the retail and other smaller investors remaining completely away for want of funds and time to study the offer.
Between January-December, as many as 21 IPOs from private sector hit the markets collecting close to Rs 15,000 crore. The major IPOs included that of InterGlobe Aviation, which runs no-frills carrier IndiGo, Alkem Laboratories, Coffee Day Enterprises and Dr Lal Path Labs.
Karvy Stock Broking’s Head of Fundamental Research Jagannadham Thunuguntla said there was no big ticket issuances from the private sector this year and hence their contribution to fund raising activity looked smaller.
“PSUs like Coal India and IOC are large companies and hence the issue size was also huge. Since private sector participated only marginally, it has impacted overall fund raising activity,” Thunuguntla said.
Coal India disinvestment in January was a major highlight of 2015, being the biggest share sale by any private or public sector company in India and exceeds the previous record of over Rs 15,000 crore made by CIL itself in 2010.
The disinvestment fetched the Government about Rs 22,600 crore on a day when the Sensex fell by nearly 500 points.
Indian Oil’s OFS garnered Rs 9,300 crore to the Government in August — on a day on the stock markets witnessed a bloodbath plummeting 1,624 points.
The other PSUs which hit the market this year were Power Finance Corp (Rs 1,673 crore), Rural Electrification Corp (Rs 1,610 crore) and Dredging Corp (Rs 53 crore).
There was no PSU stake sale between September-December as stock markets remained volatile on global worries.
For the fiscal ending March 2016, the disinvestment target has been set at Rs 69,500 crore. Of this Rs 41,000 crore is to come from minority stake sale in PSUs and another Rs 28,500 crore from strategic stake sale. The fiscal target continues to remain far off with total collections of just about Rs 12,600 crore in the nine months of the financial year so far.