Moving in line with the disinvestment agenda set for FY11, the finance minister has set a target of Rs 40,000 crore for the fiscal year 2012.
Slated for selloff next fiscal are companies such as ONGC, SAIL, Indian Oil, Power Finance Corporation and Hindustan Copper.
“I intend to maintain the momentum on disinvestment in 2011-12 by raising Rs 40,000 crore,” finance minister Pranab Mukherjee said in his budget speech on Monday. “As against a target of Rs 40,000 crore, the government will raise about Rs 22,144 crore in 2010-11.”
The finance minister further added that the higher-than-anticipated realisation in non-tax revenues had led to the rescheduling of some divestment issues planned for the current year. Turbulent market conditions in the beginning of calendar year 2011 also put paid to the planned follow-on public offering (FPO) of SAIL.
The Street too seems confident. “Achieving Rs 40,000 crore next year is easily possible with two large-sized issuances of ONGC and Indian Oil,” said S Vishvanathan, MD & CEO, SBI Capital Markets. The two issues are expected to garner Rs 11,000 crore and Rs 14,000 crore, respectively.
Having disinvested a sizeable amount in FY11, market observers believe the government will be better prepared and aware of how they need to proceed with the disinvestment programme. What will also help is that most companies lined up for disinvestment are large caps, fundamentally strong and reasonably well-managed, they say.
“The disinvestment process for FY12 can start early as the companies have already been identified. If it is started early it can be evenly spread out through the year and the target can be achieved easily,” said Yogesh Kapur, managing director -investment banking, Enam Securities.
However, there may be minor hiccups to contend with, such as volatile market conditions before investors clamber on to the proposed divestment bandwagon. Since the oil is ruling high, with its trickle-down effect, investors would in all probability seek more clarity on oil price deregulation norms. “While these companies are fundamentally strong, the question over oil price deregulation needs to be settled,” said an investment banker.
In FY11, the government diluted its stake in Power Grid Corporation of India, MOIL, Engineers India, Shipping Corporation of India and Satluj Jal Vidyut Nigam. Coal India’s initial public offering raised close to Rs 15,000 crore.