The threshold of minimum government holding for PSUs to be in ETF baskets is 52%. Bharat-22 ETF is a diversified index of 22 stocks, largely comprising PSU stocks.
The Union Cabinet will approve the strategic disinvestment of five PSUs, including Bharat Petroleum (BPCL), as well as a proposal to bring down direct government holding in PSUs to below 51%, in the next two weeks. This would serve as a booster for efforts to garner the bulk of the budgeted `1.05-lakh-crore disinvestment receipts from privatisation and exchange traded funds (ETFs).
While strategic disinvestment and ETFs would contribute the most to achieve the disinvestment target this year, mobilisations from initial public offers (IPOs), buybacks, offer for sales and asset monetisation would be minimal this year, official sources said.
“Minimum five months will be required to execute a strategic disinvestment,” a senior official said, referring to the tight situation as seven months of this year are about to get over by October-end. Sale of the government’s 53.29% stake in BPCL could alone fetch at least `56,200 crore (at current market prices), or 53.5% of the disinvestment revenue target for this year. The value of the government’s stake in BPCL, Shipping Corp (63.75%), ConCor (30%), NEEPCO (100%) and THDC (75%) could be about `84,000 crore at current prices.
With no time to lose to garner non-tax revenues at a time when tax revenues are behind the curve, the department of investment and public asset management (DIPAM) on Friday invited proposals from asset valuers, transaction advisors and legal advisers to help the government in strategic disinvestment of these five companies. So far this year, the Centre has mobilised `16,725 crore, 86% of which were contributed by Bharat-22 ETF and CPSE ETF.
Once the Cabinet gives its nod to bring down government holding in PSUs to below 51%, there would be bigger Bharat-22 ETF tranches, another senior official said. Currently, there is limited headroom to mobilise disinvestment revenue through Bharat-22 ETF because the government stakes are in the 52-53% range in many large PSUs such as IOC, Nalco, GAIL and Engineers India. The threshold of minimum government holding for PSUs to be in ETF baskets is 52%. Bharat-22 ETF is a diversified index of 22 stocks, largely comprising PSU stocks.
A record `45,080 crore via the two extant ETFs — `26,350 crore from CPSE ETF and `18,730 crore from Bharat-22 ETF — helped the Centre mobilise 53% of the disinvestment receipts in FY19. It could try to repeat the feat in FY20 as well. Among other routes, the Centre could sell 15-25% stake through IPOs of Indian Railway Finance, RailTel, WAPCOS, Telecommunications Consultants and FCI Aravali Gypsum and Minerals. However, the IPOs’ contribution to receipts won’t be more than `3,000-4,000 crore this year.