Govt to kick off minority stake sale in six PSUs

Against FY17 target of Rs 56,500 cr, Centre plans to fetch around Rs 6,400 cr in the first half

The department of investment and public asset management is gearing up for minority stake sale in state-owned companies to garner around Rs 6,400 crore (Rs 64 billion) in the first half of 2016-17.

Over the past week, the department has issued requests for proposals for merchant bankers to assist in stake sales in State Trading Corp, MMTC, NMDC, Oil India, National Fertilizers and Rashtriya Chemicals and Fertilizers (RCF).

The Centre plans to sell 15 per cent stake each in STC, MMTC and National Fertilizers, 10 per cent each in NMDC and Oil India, and 5 per cent in RCF. According to the share price of these scrips on Friday, the government could earn about Rs 6,400 crore (Rs 64 billion) from these divestments. The sales are expected to be through the offer-for-sale route.

“We want to have everything in place, including merchant banker selection and roadshows. As soon as there is an opportunity, the notification will be issued to the exchanges,” said an official.

“These are names we can sell far more easily than Coal India, ONGC and others,” the official added. The department wants the sales in the first six months of the financial year, given the steep disinvestment target for 2016-17.

The government had raised Rs 12,000 crore (Rs 120 billion) in the first six months of 2015-16 of the revised divestment estimates of Rs 25,312.60 crore (Rs 253.13 billion). This was a departure from previous years, when most divestments were carried out in the last few months.

The Centre is also planning the initial public offering (IPO) for Cochin Shipyards. For 2016-17, the divestment target is Rs 56,500 crore (Rs 565 billion), of which Rs 36,000 crore (Rs 360 billion)  is expected through minority stake sales.

As such, proceeds from the six companies would constitute just close to 18 per cent of the disinvestment target. In the past few years, the government’s disinvestment targets have gone awry because of dismal stake sale.

As such, the government had to lower its Budget Estimates for minority stake sale in the public sector units. For instance, in 2012-13, the Budget Estimate was Rs 30,000 crore (Rs 300 billion) but it had to be cut to Rs 24,000 crore (Rs 240 billion).

Similarly, the target was Rs 40,000 crore (Rs 400 billion) in 2013-14, which was slashed to less than half at Rs 16,027 crore (Rs 160.27 billion).

For 2014-15, the Budget Estimate of Rs 43,425 crore (Rs 434.25 billion) was reduced to Rs 26,353 crore (Rs 263.53 billion) in the Revised Estimate.

In 2015-16, the Budget target of Rs 41,000 crore was cut to Rs 25,313 crore. The actual was, however, higher than the Revised Estimate (see chart).

In fact, the target of realising Rs 36,000 crore through minority stake sale is the lowest in four years. In fact, even Rs 36,000 crore has never been realised from the minority stake sale in the government-owned companies since 1991-92.

Illustration: Uttam Ghosh/Rediff.com