Having to rope in government-owned Life Insurance Corporation to bail out a 10% disinvestment in Indian Oil Corporation in August, the department of disinvestment (DoD) may bide time and let markets stabilise before coming out with the next issues. In the intervening period, however, it will reach out to newer markets to widen the investor base, official sources said.
Accompanied by a small team of officials, disinvestment secretary Aradhana Johri is set to travel to Canada next week for a week-long roadshow. While roadshows earlier were limited to big financial hubs like London, New York, Hong Kong and Singapore, of late, the DoD is reaching out to newer markets. Johri had visited Australia and Japan earlier this year. The objective is to rope in long-term investors such as superannuation funds and insurance companies, who could stay invested for a longer time and bring stability to the equities market.
Amid global chaos from the Greece debt crisis to the latest doubts on the Chinese economy, India’s policymakers say the country’s economic stability, given most of India’s macro indicators such as high economic growth, low inflation and comfortable current account deficit, make it an attractive destination. However, India’s slow pace of economic reforms such as implementation of a uniform goods and services tax (GST) has disappointed many.
In the 10% stake sale in IOC on August 24, LIC bought about 87% of the offer for sale of shares worth R9,300 crore. The lukewarm response to the IOC stock, considered a robust one by market analysts, from both domestic institutional investors and foreign institutions investors, had stumped the DoD. Investors were averse to taking risks as there was a huge market crash that day due to concerns on the Chinese economy.
In the first half of FY16, the DoD has so far managed to sell stakes in four companies to raise about R12,600 crore, the best in the last seven years, but a far cry from the ambitious disinvestment target of R69,500 for the full year.
The department has lined about 20 PSUs, including a 10% stake sale in Coal India, which alone could fetch R22,000 crore at current market prices. The CIL stake sale would take the DoD close to the R41,000 crore that the government is targeting to raise through disinvestment in PSUs this year. It would raise another R28,500 crore through strategic sales including divestment of residual government stake in some private companies and privatisation of some PSUs.