The government’s mega divestment plan for the select PSUs including Bharat Petroleum Corporation Limited (BPCL) may increase free float in the market, encouraging the foreign portfolio investors to invest more.
The government’s mega divestment plan for the select PSUs including Bharat Petroleum Corporation Limited (BPCL) may increase free float in the market, encouraging the foreign portfolio investors to invest more in the capital markets, a rating agency said. In addition, this move is expected to create a wider investment space for retail and institutional investors and increase the market premium of PSUs, owing to likely positive investors perception, CARE Ratings said. The announcement is also expected to increase transparency and PSU contribution towards the higher economic growth, it added. However, there are a few key questions raised by CARE Ratings with regard to this divestment push:
- Will the acquirer of these stakes be a private entity or other PSU?
- Will the funds to acquire stake be paid from surpluses with the company or from banks? What will be the impact on the financial system?
- Will it follow more such disinvestment plans going ahead?
- Will the government overshoot the divestment target to compensate for likely shortfall in GST collection and direct taxes?
On Wednesday, the government provided a nod to divest 53.29 per cent stake in Bharat Petroleum Corporation Limited (BPCL) to the strategic buyer. Approval was also provided to the sale of stake in THDCIL along with the management control to NTPC, which will be the strategic buyer. Similarly, the government will sell 100 per cent in NEEPCO along with management control to NTPC. In addition, 53.75 per cent in SCI will be divested along with management control to the strategic buyer. The government will also sell 30.8 per cent in CONCOR along with management control to a strategic buyer.
Meanwhile, the latest privatisation push is important for the government so as to meet its ambitious target of Rs 1.05 lakh crore from asset sales in the ongoing fiscal year. Even with Rs 1.76 lakh crore received from the Reserve Bank of India (RBI), the government is struggling to meet the year’s fiscal deficit target of 3.3 per cent.