The government has missed its disinvestment target for FY16 by more than half as it postponed majority of the proposed stake sales due to weak stock markets. The government managed to garner Rs 19,514.07 crore through the divestment during the financial year against the Budgetary target of Rs 69,500 crore, data from the department of disinvestment showed. Out of the total target, Rs 41,000 crore were to come through minority stake sales and Rs 28,500 crore from strategic sales. The benchmark Sensex has lost 10.8% in FY16 so far with shares of PSUs declining in the range of 5-20% during the same period, Bloomberg data showed.
The government had planned to trim its stake in close to 20 PSUs based on the market conditions.In fact, Sebi had tweaked the Offer For Sale (OFs) norms to check the usual fall in stock prices before an OFS by reducing the time gap between the announcement and actual sale to one day instead of two days earlier. The move was aimed at avoiding short selling of PSU shares.
The OFS in Indian Oil Corporation(IOC) was the biggest divestment offering during the financial year. The government had trimmed its stake by 10% in the oil marketing company to raise Rs 9,369 crore.State owned insurer Life Insurance Corporation (LIC) had bailed out the OFS as the offering received lukewarm response from the investors.
As per the stock exchange filing made by IOC, LIC had bought 86% of the total shares tendered by the government.
The exchequer raised `5,014.55 crore by paring 5% of its stake in NTPC. LIC was the key subscriber even in this OFS
as it purchased 60% of the shares on offer.
Market participants believe that the government has taken the right decision by not selling its stake when valuations of the PSUs have dipped significantly. “It is unfair to blame the government for the developments that have taken place in external markets. I think it has done the right thing — to wait for the markets to recover so that it can garner more money through the stake sales,” said an investment banker with a leading domestic brokerage.
This is the sixth consecutive year that the exchequer has missed the disinvestment target. During FY15, the government mopped up `24,277 crore against the target of `36,925 crore, official data showed.