Finished wall clocks hang on display in Wooster, Ohio, U.S. (Photographer: Ty Wright/Bloomberg)

Government Advances Divestment Deadline For This Fiscal

The Finance Ministry is looking to complete all its planned divestments for the ongoing financial year before the election code of conduct—that restricts the government from announcing new projects, concessions or financial grants to prevent it from influencing voters—is imposed at the end of next month, a senior official aware of the development told BloombergQuint.

That comes when the government has so far mopped up less than half of the full-year target. The government aims to collect Rs 80,000 crore by selling stakes of public sector undertakings in the financial year ending March 2019. Till Dec. 28, it raised Rs 34,142.35 crore, the data available on the website of the Department of Investment and Public Asset Management showed.

Meeting the divestment target is important to bridge the budget gap as lower tax collections and increased expenditure due to farm loan waivers may worsen the fiscal health of the country. The government has set the fiscal deficit target at 3.3 percent of GDP for the ongoing financial year.

Offloading shares through exchange-traded funds has been the biggest contributor to the divestment proceeds after maiden offers and strategic sales. Besides, the government is looking at buybacks and off-market deals to raise funds. Also, four state-run companies—Mishra Dhatu Nigam Ltd., RITES Ltd., IRCON International Ltd. and Garden Reach Shipbuilders and Engineers Ltd.—launched their initial public offerings in the first six months of this financial year.

The government had garnered Rs 1,00,056.91 crore in disinvestment proceeds in 2017-18 against a revised target of Rs 1,00,000 crore, including Rs 36,915 crore in Hindustan Petroleum Corporation Ltd.-Oil & Natural Gas Corporation off-market deal.

REC-PFC Deal

On Jan. 11, the divestment department finalised RBSA Advisors as the asset valuer for sale of the government’s 52.63 percent stake in power sector financier REC Ltd. to peer Power Finance Corporation Ltd. The valuation exercise is expected to be completed within a month and the transaction by end of February, the official quoted above said requesting anonymity. The transfer of stake is likely to be an off-market transaction and will not attract an open offer as it’s a related-party deal, the official said. REC will remain a separate listed entity. The REC stake is valued at around Rs 12,960 crore and is expected to be transferred at a valuation close to Rs 15,000 crore.

Stake Sale In Dredging Corp

The cabinet in November approved the strategic sale of the government’s stake in Dredging Corporation of India Ltd. to a consortium of four ports—Vishakhapatnam Port Trust, Paradeep Port Trust, Jawaharlal Nehru Port Trust and Kandla Port Trust. The transaction, according to the official, is expected to be completed in the next one month as the due diligence has been completed by the ports. The government holds close to 74 percent in the company and expects to garner around Rs 1,000 crore. The stake’s value at the current market price is nearly Rs 900 crore.

PSU Buybacks

The government is looking at possible buybacks of PSU shares in the ongoing financial year. That’s expected to fetch close to Rs 20,000 crore. It may also consider offloading stakes held through Specified Undertaking of Unit Trust of India in the next few months to raise funds, newswire PTI reported.

Also read: How ETFs Helped Government’s Divestment Goals

Divestments In The Pipeline

Some of the key disinvestments that were announced but couldn’t proceed due to market conditions

  • Offer-for-sale of General Insurance Corporation of India Ltd. and New India Assurance Company Ltd.
  • Divestment in MSTC Ltd. through IPO.
  • Strategic disinvestment of 100 percent government holding in Central Electronics Ltd.
  • Strategic disinvestment of Bridge and Roof Ltd.
  • Disinvestment in North Eastern Electric Power Corporation Ltd. through IPO.
  • Divestment in Bharat Electronics Ltd. through offer-for-sale.
  • Disinvestment in NBCC (India) Ltd. and HUDCO through offer-for-sale.
  • Sale of Air India and five of its subsidiaries.
  • Strategic divestment of Pawan Hans.
  • Strategic divestment of 100 percent government holding in Bharat Pumps & Compressors Ltd.

Also read: India To List Seven State-Run Firms As It Races To Meet Divestment Target