With the prospects of conducting ONGC stake sale getting grimmer and an urgent need to achieve its FY15 disinvestment, the government has lined-up stake sale in four state-owned companies – Indian Oil Corporation (IOC), Bharat Heavy Electricals (BHEL), National Aluminium (Nalco), and Dredging Corporation (DCIL) for the current financial year.
On Thursday, the department of disinvestment (DoD) floated proposals seeking merchant bankers’ assistance in selling 10% stake each in IOC as well as Nalco, and 5% stake each in BHEL and DCIL.
A day earlier, the DoD had expressed interest in selling 10% stake in mining company National Mining Development Corp (NMDC).
Total proceeds from the five auctions could fetch the central exchequer roughly R18,000-18,500 crore based on current market rates. The amount is equivalent to R17,000-18,000 crore targetted from the 5% stake sale in ONGC and nearly 41% of the government’s target of R43,425 crore this fiscal.
In the 10 months of FY15, the government has managed to raise R1,719.54 crore from the 5.82% auction of Steel Authority of India (SAIL) which was bailed-out by Life Insurance Corporation (LIC) of India.
Given the failure to mobilize funds, finance minister Arun Jaitley has recently indicated that the government has lined up an aggressive disinvestment programme to meet the fiscal deficit target of 4.1% in the current fiscal.
“We still have close to three months left…this is going to be period of great activity as far as disinvestment is concerned. I am not going to give any indication but major disinvestment in the coming months prior to March 31 is going to take place,” Jaitley had said at a business award occasion organised by CNBC-TV18.
The government has lined-up 5% stake sale each in state-owned power financing companies Rural Electrification Corp (REC) and Power Finance Corp (PFC), with the latter scheduled to be launched next week. Both the transactions could help fetch about R2,900-3,300 crore.
The Centre has also lined-up 10% stake sale in MOIL and appointed IDBI Capital Markets and Edelweiss to manage the auction. Coal India (CIL) is reportedly back on track for the current fiscal after the government announced coal reforms through ordinance route as well as succeeded in ending the strike called by worker union.
The CIL deal is key for the government and its success will enable the Centre to meet half of its FY15 stake sale target.
The government has set a target to raise a total R58,425 crore, of which R43,425 crore is planned through PSU stake sale and the balance from selling residual stake owned by a government agency in erstwhile PSUs. The Centre was heavily dependent on CIL and ONGC to meet its target.
However, the 5% stake sale in the upstream oil and gas company Oil and Natural Gas Corp (ONGC) is likely scrapped after receiving ‘poor’ feedback from foreign investors during the international roadshows.
Investors had raised concerns over ONGC’s subsidy burden, which if remained unresolved would deplete the company’s cash reserves as it planned a massive capital expenditure (capex) programme.
The government put its plans to sell 11.36% stake in NHPC on hold, and also delayed the launch of RINL and HAL initial public offerings (IPOs) to next fiscal. Hindustan Zinc (HZL) and Balco hit the hurdle after the Supreme Court initiated a probe into the 2002 disinvestment, forcing the government to rethink its disinvestment strategy.