With only Rs 9,220 crore or a little over 11% of the annual disinvestment target achieved so far, the Centre has lined up a plan to conclude a series of stake sales by November-end, as it aims to exceed the FY19 disinvestment target of Rs 80,000 crore. The window is critical for stake sales as markets could become feverish in the fourth quarter of FY19, ahead of general elections in April-May.
The Centre is banking on minority stake sales in PSUs such as ONGC and Coal India, a further fund offer under the existing CPSE-ETF, buybacks by a clutch of firms, monetisation of a portion of SUUTI holdings in Axis Bank and ITC, and strategic sales of a some relatively smaller companies.
While many IPOs are also being planned, listing of Ircon International and Garden Reach Shipbuilders will materialise later this month.
Last year, the Centre was in a comfortable position on the disinvestment front by this time.
By August 2017, it was assured of receipts of Rs 55,335 crore – Rs 18,420 crore was already realised and Rs 36,915 crore was assured with ONGC agreeing to buy the government’s 51% stake in HPCL. The Centre ended up collecting the larger ever disinvestment revenue of Rs 1 lakh crore in FY18, against a target of Rs 72,500 crore.
“Just as we exceeded the target last year, we are confident of not only maintaining the disinvestment target this year but (receipts) may perhaps be in excess,” finance minister Arun Jaitley said on Sunday after a meeting on the economy and the central budget chaired by prime minister Narendra Modi.
The department of investment and public asset management (DIPAM) secretary Atanu Chakraborty doesn’t see elections queering the disinvestment pitch this year. “We will try to achieve the target. Disinvestment will continue till March 2019 through OFS, buybacks, strategic sales and IPOs,” he told FE.
Officials said the government will likely sell a 5% stake each in ONGC and Coal India, which could fetch about Rs 11,000 crore and Rs 8,900 crore, respectively, at current market prices. These could be through offer for sale or block deals. Recently, it held roadshows in the US, the UK, Hong Kong and Singapore for CIL, and in US for ONGC to gauge investor appetite. Besides these two heavyweight stocks, the Centre has lined up offer for sales in about a dozen other PSUs, including HUDCO, NBCC and Bharat Electronics.
Exchange traded fund (ETF), which has emerged as a successful tool to disinvestment stocks in the past two years, would be used to mop up some Rs 6,000 crore through a further fund offer of the CPSE ETF.
With options of big deals limited in the remaining part of the year, the Centre could monetize a part of SUUTI holding in Axis Bank and ITC. Its 7.95% stake in ITC is worth Rs 30,340 crore and 9.63% stake in Axis Bank is worth Rs 15,811 crore at current market prices.
Buyback of their own shares by PSUs could be used widely in the fourth quarter of FY19 when market transactions could slow down due to upcoming elections. Like in FY17, when it raised about Rs 18,963 crore via buybacks, it hopes to raise a considerable amount via this route in FY19 as well. About a dozen firms have been identified as potential candidates including NTPC, NALCO and NMDC, NLC, BHEL, NHPC, NBCC and SJVN. If stake sales in ONGC and Coal India don’t materialise, these two PSUs could also be asked to buyback their shares.
DIPAM is confident of executing 4-5 strategic sales including Pawan Hans and Project & Development India this year. Given that the Centre will keep the spending momentum ahead of elections and options to exceed tax revenues are limited, a sale similar to ONGC-HPCL deal last year can’t be ruled out either. Disinvestment revenue is critical to contain fiscal deficit at budgeted level of 3.3% of GDP this year.