Government Eyeing 'Moderate, Achievable Targets' For Disinvestment: DIPAM Secretary

The central government will opt for "moderate, achievable targets" that take into account the current realities of the enterprises up for disinvestment,and the prevailing global and domestic environment, according to DIPAM Secretary Tuhin Kanta Pandey.

"I don't want to hazard a guess (on the number), but disinvestment numbers are contingent upon markets and our ability to clinch the transactions, which is not a one-way street," Pandey told BQ Prime in an interview. "Because, if we have to really disinvest, there has to be people to pick up that stake," he said.

This year, the government has aimed for a Rs 65,000 crore disinvestment target, of which the total Department of Investment and Public Asset Management receipts are at Rs. 42,381.41 crore.

According to Pandey, the transactions are in various levels, with some in advanced stages and others likely to spill over on to the next fiscal owing to the nature of the disinvestment process.

"We have some strategic transactions which have been already there on the table for some time," he said.

Pandey referred to disinvestment transactions for the Shipping Corp. of India Ltd., BEML Ltd., HLL Lifecare Ltd. and Projects and Development India Ltd., where bidders are on to due diligence and financial bids are expected.

In the case of BEML, which manufactures heavy equipment, the demerger process has been substantially completed and orders have been passed, while the demerger orders for Shipping Corp., where the government is hiving off land assets, is likely to come soon, Pandey said.

The deal pertaining to NMDC Steel, the Nagarnar plant of the National Mineral Development Corp. Ltd., is also at a stage where orders have been passed, he said.

In terms of spillovers, the stake sale of IDBI Bank Ltd. is likely to drag on to the next fiscal as expressions of interest on the sale were invited earlier in October. Bids were invited for a 60.72% stake in IDBI Bank, in which 45.48% is owned by the central government and 49.24% by the state-owned Life Insurance Corp. of India or LIC.

"The expectation is that by Dec. 16, we will have the initial interest whereupon, we will proceed with the second stage of the transaction," Pandey said. "We will try that financial bids are received before the end of March, although the closing of the transaction is going to spill over to the next year."

In Hindustan Zinc Ltd., a subsidiary of Vedanta Group, the government holds 29.5% stake. Disinvestment is in the pipeline with road shows awaited, he said.

The central government is preparing to put up listings for the Indian Renewable Energy Development Agency Ltd. and the state-owned ECGC Ltd., formerly known as the Export Credit Guarantee Corp. of India.

The process of disinvestment is more nuanced than garnering receipts for the government, Pandey said.

"We have to really look at it, not only from the point of view of what receipts we get, but actually what kind of economic reform impact has been made," Pandey said.

According to him, disinvestment makes a lot of impact on the way enterprises function after the stake sale, as the entry of private players is expected to spur productivity.

"In my view, a calibrated, nuanced disinvestment strategy is taking care of the markets, and also taking care of the interests of minority shareholders ...(it) is a best-value bargain."

The DIPAM Secretary also drew attention to the dividends flowing in as disinvestment deals culminate. These are, in several respects, larger than the disinvestment receipts as well, he said.

"I'd like to say that dividend and disinvestment, to some extent, have to be looked at together because so long as we are not able to disinvest, we do have our equity giving us returns in the form of dividend."

In the last fiscal, the department's total dividend receipts stood at Rs 59,100 crore, while in the current fiscal, the receipts are at Rs 17,838 crore.