“There will likely be a big change from budget assumptions (about disinvestment receipts) made for FY21... these may have to be revised,” a finance ministry official told FE.
With Covid-19 running down the stock market, FY20 disinvestment receipts are understood to have fallen short of the revised estimate (RE) of Rs 65,000 crore by Rs 14,700 crore or 23%. The government could not execute some of the planned transactions, including sales of minority stakes in half a dozen CPSEs, as a result of the market turmoil.
Also, government officials admit on condition of anonymity that the massive plan to raise Rs 2.1 lakh crore via the disinvestment route in FY21, may have to pared down substantially.
This marks a reversal of the trend seen in the last two years which saw the government netting higher amounts than the budget estimates (BEs) via the sale of its stakes in firms through various means.
The RE for disinvestment receipts in FY20 was 38% lower than BE of Rs 1.05 lakh crore. In FY19, the Centre had collected Rs 85,000 crore via sale of government stakes in companies against the original target (budget estimate) of Rs 80,000 crore In FY18, it had collected Rs 1,00,045 crore compared with BE of Rs 72,500 crore and RE of Rs 1,00,000 crore.
“There will likely be a big change from budget assumptions (about disinvestment receipts) made for FY21… these may have to be revised,” a finance ministry official told FE.
Among the mega deals in the disinvestment pipeline,the government had planned to garner Rs 70,000-80,000 crore by selling 53.3% stake in oil retailer-cum-marketer in FY21. A plan was also announced to sell 30.8% in ConCor to a strategic buyer. Further, a substantial amount was planned to be raised by selling up to 10% stake in state-run insurer LIC through its listing. There is now great uncertainty over the feasibility of all these plans.
Nevertheless, in the past one week, a number of transactions were concluded. In CPSE-to-CPSE deals, the Centre sold its entire stakes THDC and Neepco to NTPC for a consideration of Rs 11,500 crore. In another similar transaction, `2,383 crore was garnered from the sale of the Centre’s 67% stake in Kamarajar Port to Chennai Port. Also, the Centre got Rs 600 crore by sale of small pieces of its residual stakes in various private companies held via SUUTI.
With the novel coronavirus playing havoc on financial markets worldwide, affecting valuations of stocks, the department of investment and public asset management (DIPAM) has had no headroom to further augment revenues from buybacks, offers for sale (OFSs), initial public offers (IPOs) or selling a small portion from SUUTI’s holdings in Axis Bank and ITC to meet the RE for FY20
The Centre had plans to sell minority stakes in half-a-dozen CPSEs — Coal India, Cochin Shipyard, Hindustan Aeronautics (HAL), Bharat Dynamics (BDL), Mishra Dhatu Nigam (MDNL) and Garden Reach & Shipbuilder Engineers (GRSEL). However, the slump in many of the CPSEs’ stock prices by as much as 30% or so became a spoiler.