New Delhi, Nov. 23: State-run Air India has joined other top PSUs in deferring initial public offers (IPOs) because of the meltdown in the stock markets.

Other state-owned firms likely to defer their IPOs include NHPC, Oil India, Bharat Sanchar Nigam Ltd (BSNL), Coal India, RITES, State Bank of India (follow-on offer) and Ircon International, according to senior officials.

However, stock markets are demanding public floats by blue-chip PSUs to revive the interest of retail investors.

Analysts referred to the Maruti issue in 2002, which the government successfully held at a time of a downturn.

Chambers, too, are rooting for IPOs by state entities. Assocham president Sajjan Jindal has asked the government to push for such issues.

The government had looked to earn up to Rs 25,000 crore in the current financial year by divesting small stakes in state-run companies, according to finance ministry officials.

Its aim was to raise money to shovel cash into social sector projects and revive sick PSUs.

Besides the Air India issue, the officials said, the government was also banking on the BSNL and NHPC issues.

Listing plan

At the beginning of this year, the government had sought to list more state-run companies to take advantage of the stock market boom.

Civil aviation minister Praful Patel had said that efforts were on for an IPO by Air India in the second half of 2008.

However, with the equity markets sliding down almost 56 per cent, the government is not keen on these public offerings for the moment. The 30-share bellwether sensex has lost around 8000 points from an all-time high of 21206.77 in January.

Besides, Air India has been in the red like most of its cash-strapped rivals. The officials said the airline first needed to improve its financials before hitting the capital markets.

Domestic airlines are estimated to end the financial year with combined losses of up to Rs 8,000 crore. Air India is expected to account for a quarter of the losses, according to market analysts.

It needs to raise more resources to shore up its equity base to complete the purchase of 111 aircraft and modernise equipment. The government had hoped to raise up to Rs 2,000 crore from the Air India issue.

Contentious issue

The Congress-led government’s efforts to divest stake in state-run companies had met with stiff opposition from its allies.

Stake sales in Neyveli Lignite, Nalco, Power Finance Corporation and NMDC were stalled in July 2006.

However, the finance ministry believes that the best way to implement social welfare projects is to sell small stakes in PSUs.

“These stake sales or even the issues of fresh equity help unlock the real value of the firms. These firms also become much more accountable once they have to perform under the scrutiny of the market, without any significant dilution of equity,” the officials said.