The disinvestment policy, aimed at unlocking the shareholder value of profitable public sector undertakings (PSUs), has become a crucial strategy for the government to keep its fiscal calculations on track. Finance minister Pranab Mukherjee has set a target of R40,000 crore from the disinvestment proceeds for 2011-12, despite the government missing its target for the current fiscal year.
The government could garner only R22,144 crore from its six disinvestment offers; but it has a cushion of one-time revenue boost from the 3G spectrum sale. For the next fiscal, it is extremely important for the government to meet its disinvestment target in order to meet its fiscal deficit target of 4.6% of GDP.
The Centre is planning to sell its stake in eight-to-nine state-run firms in 2011-12. Kick-starting the next fiscal with public offering of oil major Oil and Natural Gas Corporation, scheduled for mid-April, the government plans to bring out three issues in the first quarter. Apart from the oil major, follow-on public offerings of Power Finance Corporation and Steel Authority of India are also planned for the April-June quarter.
Through the ONGC offer, the government intends to mobilise R11,500 crore from a 5% share sale. The government originally planned the share sale in the 2010-11 fiscal, but due to unfavourable market conditions, the issue was deferred to the next fiscal.
After that, the government is likely to come out with a R5,600-crore FPO by Power Finance Corporation, followed by SAIL. The Centre is however likely to postpone the second tranche of disinvestment in SAIL to 2012-13.
After the tremendous investor response received for the maiden Coal India issue, disinvestment is largely seen as helping stir positive sentiments among the investor community. Another significant point is that the disinvestment stocks are generally available at a discount in comparison to peer companies. Hence, disinvestment is seen as a good opportunity for retail investors.
The Centre?s disinvestment road map is likely to include MMTC, National Buildings Construction Corporation (NBCC) and Rashtriya Ispat Nigam (RINL).The Union government is expected to divest up to 10% stake in MMTC and NBCC each in order to meet the 10% public holding norm for initial public offerings. The government holds 99.33% stake in MMTC.
NBCC and RINL are both fully owned by the government. RINL needs to divest 10% of its stake and list on the bourses to keep its Navratna status.
Another probable on the list is oil major Indian Oil Corporation, but a 10% stake sale in it is likely to be pushed back to the second half of 2011-12 .
The long-awaited stake sale in Hindustan Copper Ltd may be delayed to the later part of the year as the mining company is understood to be reviewing its investment plans. The offer comprising of 10% disinvestment and 10% fresh equity by the firm is supposed to raise R4,000 crore.
