BPCL's Divestment In FY23, LIC's IPO Filing Soon, Says DIPAM Secretary Tuhin Kanta Pandey

India's likely to complete the divestment of state-run oil refiner Bharat Petroleum Corp. in the next financial year as the Covid-19 pandemic disrupted the deal in the ongoing fiscal, according to Tuhin Kanta Pandey, head of the department that manages the government's holdings in companies.

"The kind of response, the kind of money which we have envisaged (from BPCL transaction) will not come in this financial year," the secretary of Department of Investment and Public Asset Management told BloombergQuint's Sajeet Manghat in an interview. "We hope to complete BPCL’s privatisation in FY23.”

The government, he said, is also likely to conclude the ongoing divestments of Shipping Corp. of India and Bharat Earth Movers Ltd. in the next fiscal.

Finance Minister Nirmala Sitharaman in this year’s budget reduced the government's disinvestment target for FY22 to Rs 78,000 crore and set FY23 target at Rs 65,000 crore. "FY22 budget estimate of Rs 1.75 lakh crore for divestment was based on certain expectations of transactions completing, but the year saw two Covid-19 waves disrupt activity," Pandey said.

The government has now changed its disinvestment strategy, he said. "Minority stake sale is not going to be a very important part except for listing new companies like Life Insurance Corp. of India.”

"The government could consider Export Credit Guarantee Corporation of India for listing in FY23, and smaller companies like National Seeds Corporation," he said.

The government is close to 51% holding in many very large PSUs, with not much room to sell further minority stake, he said, adding it doesn’t have much listing pipeline left.

Privatisation, Pandey said, is now the main goal. "We will go for only a bare minimum presence going forward in strategic and non-strategic sectors; we can actually make a complete exit either through privatisation or if it fails, through closure of the enterprises."

LIC IPO

Pandey expects LIC’s IPO, which is expected open in the coming months, to help the government cross its revised divestment target set for FY22. "The LIC IPO will happen in FY22, but the quantum of sale is tentative at this juncture... Subject to more visibility the IPO proceeds, may even exceed FY22 revised estimates on disinvestment," he said.

The size of the LIC transaction will be known in a week or so when its draft red herring prospectus is filed, he said.

The government, in accordance with market regulations, is expected to sell a minimum of 5% stake in the state-run insurer.

A lot of consultation has already gone on with Securities and Exchange Board of India and the insurance regulator IRDAI on aspects of DRHP, said Pandey. "Since LIC IPO is a large exercise, we are working DRHP out in a manner for SEBI to look at it in an informal manner."

"We're just waiting for LIC’s embedded value to plug in and bifurcated numbers for September, which will be updated," he said. "And while we file the DRHP, we can update for the December numbers in another 4-5 days."

“We will see a lot of activity in February and March ahead of LIC’s IPO opening. There is great excitement around the globe about IPO,” Pandey said. "The government has upgraded banking and IT systems in anticipation of large retail interest in LIC IPO."

Watch the full interaction here