The government expects disinvestment to pick up steam soon even as it may fall short for the prescribed target for the current financial year 2018. The Finance Ministry expects for the completion of a few strategic sales by end of the year, ET Now reported citing unidentified government sources. Listing of General Insurance companies will boost government kitty, it added.
Earlier in August, the government announced the launch of Bharat-22 — a new ETF (exchange-traded fund) of 22 companies — buoyed by the encouraging response to its earlier CPSE ETF — a fund of 10 state-run companies. The Indian government has an ambitious target to earn Rs 72,500 crore in the current financial year 2017-18 through a sale of the stake in state-run companies. The government raised Rs 46,247 crore through disinvestment In the last financial year 2016-17, the highest ever amount earned by the sale of an equity stake in PSUs.
IPOs in pipeline
In a major boost to the Narendra Modi administration’s disinvestment drive to sell equity stakes in profitable PSUs to raise funds, the government is considering selling up to 25% of its equity stakes in four state-run defence companies namely Mazagon Dock Ltd, Bharat Dynamics Ltd, Garden Reach Shipbuilders & Engineers Ltd and Mishra Dhatu Nigam Ltd. New India Assurance Company the second state-run non-life insurance company stepping forward to come up with an IPO. The public offer which could net the government up to about Rs 8,000 crore out of a total IPO size of over Rs 10,000 crore, according to various news reports. Another news report pegged the total IPO size at about Rs 6,300 crore. The IPO will constitute 14.6% of the company’s post-issue share capital and will bring down the government’s stakeholding in New India Assurance to 85.4%. The state-run reinsurer General Insurance Company is also headed up with its IPO. General Insurance Co is first of the five state-run non-life insurance firms to initiate a stake sale and listing process. The offer comprises a fresh issue of 1.72 crore shares and an offer for sale of 10.75 crore shares by the government of India. Following the IPO, the government’s stake in the reinsurance firm will reduce by 14.22%, according to the DRHP (draft red herring prospectus).
Disinvestments in FY 2018
So far this financial year, the government has sold equity stakes in Hindustan Copper through a recently concluded OFS (offer for sale), Cochin Shipyard, HUDCO, L&T (held through SUUTI) and Dredging Corporation, among others. This fiscal, the government seeks to sell 10% equity stake each in three major state-run railway companies IRCTC, Ircon and IRFC via IPOs. In February, SUUTI sold 2% from its 11.7% equity stake held in the tobacco major ITC Ltd in a block deal for reportedly 6,700 crore.