In a major boost to the Narendra Modi administration’s disinvestment drive to sell equity stakes in profitable PSUs to raise funds, the government is considering selling up to 25% of its equity stakes in four state-run defence companies under the control of the department of defence through IPOs (initial public offerings) for sale of shares. The government is looking to sell stakes in Mazagon Dock Ltd, Bharat Dynamics Ltd, Garden Reach Shipbuilders & Engineers Ltd and Mishra Dhatu Nigam Ltd. It has invited proposals for the IPO by 3 pm on August 18.
Indian government has undertaken strategic stake sale in profitable PSUs to help boost state revenue and bridge the fiscal deficit. It has an ambitious target to earn Rs 72,500 crore in the current financial year 2017-18 through sale of stake in state-run companies. The government raised Rs 46,247 crore through disinvestment In the last financial year 2016-17, the highest ever amount earned by sale of equity stake in PSUs, though falling short of the original target, as was expected.
So far this financial year, the government has sold equity stakes in Hindustan Copper through a recently concluded OFS (offer for sale), Cochin Shipyard, HUDCO, L&T (held through SUUTI) and Dredging Corporation, among others. This fiscal, the government seeks to sell 10% equity stake each in three major state-run railway companies IRCTC, Ircon and IRFC via IPOs. The Union Cabinet has also approved listing of five state-run general insurance companies, which is likely to begin only in the next financial year with the first listing possible by September-October. The government is also reportedly looking at selling 10% equity stakes each in the capital goods major Bharat Heavy Electricals Ltd and energy company Oil India Ltd.
Additionally, the government is gradually selling its stake in companies held through SUUTI (Specified Undertaking of Unit Trust of India) in open market transactions. The government has mulled selling SUUTI’s equity holdings several times, and is also reportedly considering including SUUTI stakes in its proposed next CPSE ETF – the exchange-traded fund of public sector enterprises – which it plans to launch in the current financial year 2017-18.
Earlier June the government sold 2.5% of its equity stake in engineering major Larsen & Toubro held through its investment arm SUUTI for more than Rs 4,000 crore. In February, SUUTI sold 2% from its 11.7% equity stake held in the tobacco major ITC Ltd in a block deal for reportedly 6,700 crore. The state-run insurer-AMC Life Insurance Corp of India was the buyer in the deal. Previously, in 2014, SUUTI sold 9% equity stake in Axis Bank, raising Rs 5,500 crore.