BPCL deal unlikely before March-end, govt could miss disinvestment target: Finance secretary TV Somanathan

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November 26, 2021 3:45 AM

Somanathan said the government’s tax revenues as well as expenditures would exceed the respective Budget Estimates (BEs) in FY22.

Department of investment and public asset management secretary Tuhin Kanta Pandey said recently that financial bids for privatising as many as many as six CPSEs, including BPCL, BEML and Shipping Corp, would be invited by January.Department of investment and public asset management secretary Tuhin Kanta Pandey said recently that financial bids for privatising as many as many as six CPSEs, including BPCL, BEML and Shipping Corp, would be invited by January.

With privatisation of BPCL delayed, the government could miss the ambitious Rs 1.75-lakh-crore disinvestment target for the current fiscal, finance secretary TV Somanathan said on Thursday.

“There is a good chance of LIC disinvestment going through this (fiscal) year,” he told CNBC-TV18, but added that he was not sure if BPCL sale could be concluded in the year. This is for the first time a senior government functionary admitted that the disinvestment target could be missed, although the pace of the BPCL bidding process had raised doubts about the target among market watchers and potential investors.

Somanathan said the government’s tax revenues as well as expenditures would exceed the respective Budget Estimates (BEs) in FY22.

With the sale of Air India to Tata group to be completed by the end-December, the finance secretary said the government would make a ‘substantial’ provision in the forthcoming supplementary demand for grants, towards clearing the national carrier’s dues to banks, fuel companies, etc.

Department of investment and public asset management secretary Tuhin Kanta Pandey said recently that financial bids for privatising as many as many as six CPSEs, including BPCL, BEML and Shipping Corp, would be invited by January.

The bidders for BPCL are anxious about what they perceive as a lack of definite timelines for the company’s privatisation process, as they think any delay could impair their ability to arrange funds. Large deals involving big investments can take 4-5 months for completion. The market value of the Centre’s entire stake in BPCL is worth about Rs 46,000 crore at the current prices.

The LIC IPO could include offloading of up to 10% government stake and some fresh equity issuance by the insurer for business expansion plans. While the valuation of the insurer will be known closer to the listing, it is believed to be worth Rs 8-11.5 lakh crore, meaning a 10% stake sale could fetch the government around Rs 80,000-1,00,000 crore.

Tatas won the bid for acquiring AI by offering Rs 18,000 crore as enterprise value (EV) consideration. While the government as the carrier’s owner will get Rs 2,700 crore or 15% of the bid amount in cash, the balance will go towards clearing the airline’s part debt. Air India had a heavy debt of Rs 61,562 crore as on August 31; the government had assumed the carrier’s Rs 22,064-crore debt in FY20, in an effort to make its sale feasible, it will take over another Rs 46,262-crore debt as part of the deal with Tatas.

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