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Regular-article-logo Tuesday, 05 March 2024

Selloff target proves elusive

Revised divestment target for 2019-20 is Rs 65,000 crore, of which around 75% have been met

R. Suryamurthy New Delhi Published 29.03.20, 09:29 PM
Even if some PSUs undertake buybacks, it would not fetch more than Rs 2,000 crore. Similarly, offer for sales are now uncertain unless stock prices recover sharply from the recent lows.

Even if some PSUs undertake buybacks, it would not fetch more than Rs 2,000 crore. Similarly, offer for sales are now uncertain unless stock prices recover sharply from the recent lows. Shutterstock

A flurry of last-minute selloffs was not enough for the Centre to meet its revised divestment target of Rs 65,000 crore for the current fiscal.

NTPC on Friday acquired the government’s stake in two hydroelectric companies — THDC India and North Eastern Electric Power Corporation Ltd (Neepco) — for Rs 11,500 crore, while Chennai Port Trust acquired the government’s stake in Kamarajar Port for Rs 2,383 crore. Following the strategic sale of these units, the government has garnered Rs 48,728 crore under stake sales, way short of the revised target of Rs 65,000 crore announced by finance minister Nirmala Sithraman while presenting the budget in February.

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Coronavirus and its adverse impact on the financial markets worldwide have affected the valuations of CPSEs as well as the valuation of SUUTI (Specified Undertaking of the Unit Trust of India) holdings in Axis Bank and ITC. The Centre, therefore, has limited headroom to garner revenues from buybacks, offer for sales (OFSs), initial public offerings (IPOs) or selling a small portion from SUUTI’s holdings.

Even if some PSUs undertake buybacks, it would not fetch more than Rs 2,000 crore. Similarly, offer for sales are now uncertain unless stock prices recover sharply from the recent lows.

The Centre had plans to sell minority stakes in half-a-dozen CPSEs — Coal India, Cochin Shipyard, Hindustan Aeronautics (HAL), Bharat Dynamics (BDL), Mishra Dhatu Nigam (MDNL) and Garden Reach & Shipbuilder Engineers (GRSEL). However, the bloodbath in the market has declined the value of these firms and OFS in the current situations is unlikely.

A sale of a portion of SUUTI’s stake in blue-chip private companies – Axis Bank and ITC – would have helped the Centre meet the divestment target for this fiscal had their stock prices not declined around 30 per cent in the past one month.

The government’s stake held through SUUTI in Axis Bank is 4.59 per cent and in ITC is 7.92 per cent, which is estimated to be worth around Rs 20,000 crore.

The Centre had garnered Rs 85,000 crore in divestment receipts in 2018-19, Rs 5,000 crore more than the target for the year. It set a goal of Rs 2,10,000 crore for 2020-21, including Rs 90,000 crore from the sale of government stakes in banks and financial institutions.

Analysts said the government’s plan to sell its marquee assets — Air India, Bharat Petroleum Corporation Ltd, Container Corporation of India and Shipping Corporation of India — in the next financial year could now take a hit.

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