Buybacks, IPOs, strategic deals lead disinvestment process in FY19

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Published: May 3, 2019 12:49:26 AM

Electrification Corporation (REC) by transferring `14,500 crore to the government.

The government successfully completed strategic disinvestment of HSCC (India), Dredging Corporation of India, National Projects Construction Corporation and PFC-REC deal.

The disinvestment target of the government for FY19 was met primarily through buybacks, IPOs and strategic disinvestments. In FY19, 11 PSUs bought back their shares and 5 companies got listed on the bourses.

In FY18, 13 companies had bought back their shares and 6 companies had gone through the IPO route. Under the buyback mode, the government raised money by selling its equity shares in the company to the central public sector enterprise (CPSE) itself. FE had earlier reported that in FY19 public sector undertakings dominated the list of buyback offers.

Funds garnered through disinvestment reached an all-time high of `1.05 lakh crore in FY18, compared with a budgeted target of `72,500 crore. The amount dropped by 15.07% in FY19 to `84,972.17 crore. However, the government exceeded its disinvestment target of `80,000 crore and has crossed its target for the second consecutive year. Prior to FY18, majority of the disinvestments were done through offer for sale (OFS) and the employee OFS route. The number of OFS in FY19 got reduced significantly to only one from seven in FY18. “If the market remains strong, then we could see more of OFS in the current fiscal,” said an investment banker.

In FY19, the strategic disinvestment (sale) route too gained traction. The government successfully completed strategic disinvestment of HSCC (India), Dredging Corporation of India, National Projects Construction Corporation and PFC-REC deal.
Through strategic disinvestment, the government was able to garner `15,913 crore. The PFC-REC deal was the major contributor. State-owned Power Finance Corporation (PFC) completed the acquisition of majority stake in Rural

Electrification Corporation (REC) by transferring `14,500 crore to the government.

In FY18, the HPCL-ONGC deal helped the government garner `36,915 crore. “The strategic partner, after the transaction, may hold less percentage of shares than the government, but the control of management would be with it,” according to a report by Department of Investment and Public Asset Management.

The government has set the disinvestment target for FY20 at `90,000 crore, higher than `80,000 crore budgeted for FY19. For the current fiscal year, Rail Vikas Nigam hit the bourses in April and fetched `480 crore to the government. This was the first (CPSE) disinvestment in the current fiscal. In addition, through enemy property sale, the government has garnered `1,874.36 crore this fiscal.

To facilitate quick sale of CPSEs, the Cabinet Committee on Economic Affairs on March 7 approved an alternative mechanism to decide on the timing, price and quantum of shares of a state-run company to be put on the block for outright sale.

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