With seemingly less appetite for privatisation in the current political environment, department of investment and public asset management (Dipam) secretary Tuhin Kanta Pandey told Prasanta Sahu that the approach towards capital management is now holistic to create value for all shareholders and not rush through disinvestments. The strategic sale of IDBI Bank is expected to go through in the current financial year, Pandey added. Excerpts.
Has the government lowered its ambitions on disinvestment?
I would say, yes. There is a change in strategy in a way, the time horizon is a little more flexible in the way you look at value creation and monetisation. We have to keep concentrating on value creation. Dividend continues to be important to us. Dividend should be in sync with how an investor looks at it. So, the government as an investor and minority shareholders as investors, we are trying to align. We want companies to be profitable, push capex which is fruitful and push management for the growth of the companies. If we are maximising only dividends or maximising disinvestment, I think we are going farther from the normal investors’ behaviour. Then, my behaviour is more like fiscal management.
So, the government is acting more in a way like a normal investor?
Instead of being driven by the fiscal, we have to change time horizon of monetisation. We don’t have to it aggressively. We can do it gradually like an investor in a calibrated manner. We should create value and liquidity in stocks. Why should I race to bring down the government stake to the 51% level and why not 60% level, why not 65%? Companies are investing in projects, which will acruue value in months ahead, Why sell in a hurry? So, the timing has to be right.
Any change in strategy to improve the performance of PSUs?
That is where we have to concentrate a lot. Recently, a committee has also been formed by the department of public enterprises to relook the memorandum of understanding (MoU) parameters on the performance of PSUs. Some tweaking was done earlier by adding certain market-oriented parameters. So, it is not merely sales turnover, top line and bottom line. Sectoral comparison with their private sector peers is also important. We have to incentivise or encourage our people to look at these companies as managing public assets with a certain level of public responsibility. Because of this new approach in public asset management, the market is appreciating it.
Will IDBI Bank strategic sale happen in FY25?
We are expecting a communication from RBI (on fit and proper assessment of shortlisted bidders). I believe we will get it soon. Then, we move on to the due-diligence stage and the share purchase agreement has to be negotiated. There’s a fair amount of stuff to be done. We hope to get the financial bids and complete the transaction this year.
Will shifting of buyback tax to the receivers of proceeds affect PSU buybacks?
No. Earlier, companies had to pay tax at the buyback stage. Now, the buyback receipts will be taxed as per the maximum marginal rate of the shareholders who tender shares except the government (in the case of PSUs). Buyback tax (20%) was lower than the maximum marginal rate of receivers (which could be as high as 39%). In a sense, it is more equitable. The companies will save on taxes in buyback transactions now, which they can use to increase the size of buybacks.