The choppy stock markets could mar the government’s prospect of meeting the Rs 80,000-crore divestment target set for the current fiscal. The final sprint to meet the target is set to begin in the coming days with ETFs, IPOs and strategic sales of stakes.
The Narendra Modi-government, however, hopes to meet the target for the second fiscal in a row with another round of Bharat 22 ETF and listing of state-owned firms apart from the sale of the government’s stake in state-run Rural Electrification Corporation to Power Finance Corporation.
“We are confident of meeting the target… but it would be less than the performance of the last fiscal,” a senior finance ministry official said.
The revenues from the stake sale will be crucial as there are concerns that the government could slip on the fiscal deficit front and breach the 3.3-per-cent GDP target set for the year.
“Although potential buybacks by some PSUs and purchase of the government’s stake in certain entities by other PSUs may help to shore up the divestment proceeds, some concerns linger over the likelihood of achievement of the full-year target,” rating agency Icra said in a report.
“The government plans to launch the next tranche of Bharat 22 ETF in February… potential to garner up to Rs 10,000 crore through the exchange-traded fund without rebalancing the index,” officials said.
The Bharat 22 ETF, which was launched in 2017-18, has 16 central public sector enterprises covering six sectors, three public sector banks and three private sector companies where the Specified Undertaking of Unit Trust of India has a stake.
The companies in the ETF include ITC Ltd, Larsen & Toubro, Oil and Natural Gas Corp Ltd, Indian Oil, State Bank of India, Bharat Petroleum and Coal India.
Care Rating said the “divestment target could be exceeded given the progress so far with the ETF route also chipping in”.
The acquisition of REC by PFC could result in the government coffers receiving Rs 10,000-15,000 crore. The government holds around 52.63 per cent in REC and 65.64 per cent in PFC.
Also, the government plans to list government firms to unlock their potential and value. The firms which could hit the market with IPOs are Telecommunication Consultants (India) Ltd, RailTel Corporation India Ltd, National Seed Corporation India Ltd, Tehri Hydro Development Corporation Ltd, Water & Power Consultancy Services (India) Ltd and FCI Aravali Gypsum and Minerals (India) Ltd.
Kudremukh Iron Ore Company (KIOCL) will come up with an FPO.
Besides ONGC and IOC, at least half a dozen other central PSUs have disclosed share buyback programmes. Prominent among these include NHPC, Coal India, Oil India Ltd, Bhel, Nalco, NLC, Cochin Shipyard and KIOCL.
The government has realised Rs 34,142-crore divestment proceeds against the budget estimates of Rs 80,000 crore for 2018-19 so far, according to Dipam data.
Total divestment proceeds during 2017-18 was Rs 1,00,056 crore against the revised target of Rs one lakh crore. It could be achieved mainly on the back of multiple deals such as an agreement with ONGC for the strategic sale of its 51.11 per cent equity shareholding in HPCL for Rs 36,915 crore.