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JAN 14 2015

Disinvestment department readying Plan B to handle big stake sale hurdle

  • Economic Times, ET Bureau / Hyderabad
  • Created: Wed 14th JAN 2015

The disinvestment department is readying a Plan B for the rest of the financial year should one of the big-ticket stake sales hit a last-minute hurdle.

As many as eight offers are lined up under this option that will end with a Rs 6,000 crore second tranche of sales through the Exchange-Traded Fund (ETF) that the government had launched last fiscal. The department is expected to seek cabinet approval for some offers later this week and start consultations with other ministries for some new ones.

Disinvestment department readying Plan B to handle big stake sale hurdle "In the Plan B scenario, we can have one issue in January followed by three issues each in February and March," a senior government official told ET, adding that the stake sale through the ETF route is likely in March.

The department has cabinet approval to sell 10% stake in Coal India and 5% in ONGC, which at current prices could fetch a total of nearly Rs 38,000 crore.Plan B will come into play if these do not go through for some reason. "If the big issues go through then these approvals could be used for an early start to the disinvestment programme next fiscal," said a senior finance ministry official, requesting anonymity.

The government has already conducted road shows for the Coal India issue.The government has so far managed to raise Rs 1,715 crore through a 5% divestment in Steel Authority of India (SAIL) against a record target of Rs 58,425 crore.

On the sidelines of the Vibrant Gujarat investor meeting on Monday, finance minister Arun Jaitely said the government will sell stakes in more than one company in the rest of the financial year. Stake sales in Indian Oil Corp. and Bharat Petroleum Corp. Ltd are also on the radar with oil marketing companies making sharp stock market gains in recent months. While the government has a small 3% disinvestment margin in BPCL as it holds a 54.9% stake in company, there is more room for asset disposal in IOC where it has 68.57%.

The government also has approval for the sale of 5% each in Power Finance Corp., Rural Electrification Corp. and ONGC. A 10% stake sale in MOIL is also under consideration. The government is also looking to divest stakes in SJVN, Container Corporation of India and NHPC.

Last week, the finance ministry had held a meeting with oil ministry officials on identifying possible disinvestment candidates. "We want to surprise the markets. A pipeline will ensure that no particular stock takes a beating as it has happened in the past," the official added.Last fiscal, the government had raised around Rs 4,000 crore through the ETF route.

Some experts believe that the government should change its strategy from piecemeal disinvestment to stake sales in large chunks. "Foreign investors pull down the price knowing that the same scrip will be available after a year, so the government should look at bringing its stake close to 51% in one shot, which will limit that opportunity," said Kishore Otswal, CMD of CNI Research.


TOTAL Gujarat Steel Authority of India Ltd. National Hydroelectric Power Corporation Ltd. Finance Coal Oil Ministry Oil ONGC Oil Marketing Companies SAIL Petroleum Bharat Petroleum Corporation Limited Rural Power India

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