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JAN 13 2015

Govt banks on Coal India sale to save the day

  • Economic Times, ET Bureau / Hyderabad
  • Created: Tue 13th JAN 2015

A daunting disinvestment target to achieve this fiscal and with little progress made on it so far, the government is working towards selling stake in Coal India that could fetch R22,500-23,000 crore - a move that would save embarrassment and hopefully restore investor confidence in the government's aim to achieve 4.1% fiscal deficit target for FY15.

The investor road shows of Power Finance Corporation (PFC) and Rural Electrification (REC) in six overseas destinations kick started on Monday, and the government looks to raise at total of R2,900-3,300 crore from both the offers. The timing and launch of the REC and PFC stake sale depends on the feedback from the road shows.

The Centre has lined-up MOIL and appointed SBI Capital Markets, IDBI Capital Markets, and Edelweiss to manage 10% stake sale in the state-owned manganese-ore mining company. SJVN's 10% stake sale is another disinvestment target for this fiscal as the chances of launching ONGC's auction in FY15 gets thinner. Similarly, the planned stake sale in NHPC, Hindustan Aeronautics (HAL), and Rashtriya Ispat Nigam (RINL) have also been put on hold for the current fiscal.

Disinvestment1

Finance minister Arun Jaitley last week indicated the government has lined up an aggressive disinvestment programme to meet the fiscal deficit target of 4.1% in the current fiscal. "As far as disinvestment figures are concerned, we still have close to three months left. And I can only tell you this is going to be period of great activity as far as disinvestment is concerned. I am not going to give any indication but major disinvestment in the coming months prior to March 31 is going to take place," Jaitley said at a business award occasion organised by CNBC-TV18.

In the case of CIL, the government now appears to have altered its earlier plan of selling 5% stake in two tranches as it brought a solution to coal mining through the ordinance route and also successfully resolved the protests by 5.5 lakh Coal India workers.

Unlike for ONGC, foreign investors are keen to invest in CIL given the policy reforms and improvement in coal production and off-take.

"Notwithstanding the current disinvestment overhang, we maintain that CIL remains a good long-term story," Nomura analyst Anirudh Gangahar said in a recent note to investors.

Disinvestment2

The CIL deal holds key for the government and its success will mean the Centre will raise half of its FY15 stake sale target. So far the government has managed to raise R1,719.54 crore from the 5.82% auction of Steel Authority of India (SAIL) to public investors. However, the offer failed to get the right response from institutional investors and had to bailed-out by Life Insurance Corporation (LIC) of India. The insurance behemoth bought about 72% of the total shares in SAIL offer.

FE had earlier reported that LIC was booking profits from its equity investments as it wanted to keep free cash in its kitty for the divestment of ONGC and Coal India. Data showed that DIIs had sold R7,826 crore ($1.3 billion) worth of equities in November last year - the biggest monthly sale since March 2014.

The government has set a target to raise a total R58,425 crore, of which R43,425 crore is planned through PSU stake sale and the balance from selling residual stake owned by a government agency in erstwhile PSUs.

Tags

TOTAL Steel Authority of India Ltd. National Hydroelectric Power Corporation Ltd. Renewable Energy Certificates Power Finance Corporation Finance Coal Coal India Limited ONGC SAIL Fiscal Deficit Nomura Public sector units Rural Electrification Corporation Rural CIL Power coal mining India REC SBI

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