Government Exceeds Scaled-Down Disinvestment Target

Budget 2017-18 had revised the target to Rs 45,500 crore.

Indian rupee notes and coins displayed in Mumbai, India (Photographer: Santosh Verma/ BloombergNews)
Indian rupee notes and coins displayed in Mumbai, India (Photographer: Santosh Verma/ BloombergNews)

The government exceeded its scaled-down disinvestment target for this financial year, helped by buybacks at state-run firms and sale of shares in private companies.

It mopped up nearly Rs 46,200 crore, a little higher than the revised estimate, a senior finance ministry official told BloombergQuint on the condition of anonymity. The government had set a disinvestment target of Rs 56,500 crore for this financial year, but revised it to Rs 45,500 crore when announcing expected revenue receipts in the Union Budget for financial year 2017-18. Of that, Rs 40,000 crore was to come through minority stake sales and the rest from strategic sales.

The Department of Investment and Public Asset Management (DIPAM) conducted seven buybacks of shares by government owned public listed companies. The buybacks by MOIL Ltd., NMDC Ltd., Bharat Electronics Ltd., National Aluminium Company Ltd. and Coal India Ltd., among others helped the government raise approximately Rs 25,000 crore – more than half the revised target.

The buybacks also helped boost the the market capitalisation of these companies by Rs 60,000 crore, the official said.

Two more state-run companies Engineers India Ltd. and Oil India Ltd. have also announced share buybacks.

Sale of shares of private companies held by the government-owned Specified Undertaking in Unit Trust of India (SUUTI) helped raise another Rs 10,778 crore, the official said. This included a 2 percent stake sale in ITC Ltd. to Life Insurance Corporation of India (LIC) through a block deal on March 7, amounting to Rs 6,682 crore.

The second and third tranches of an exchange-traded fund (ETF) of public sector companies also received impressive response from both anchor and retail investors, the official cited above said. The Central Public Sector Enterprise ETF was launched in 2014 and raised Rs 3,000 crore in the first tranche and a total Rs 8,500 crore in the two subsequent fund offers in financial year 2016-17.

An ETF is a security that can be traded on exchanges and has stocks, bonds or commodities as underlying investments.

But the government could not execute a single strategic sale in the financial year, despite reducing the target to nearly one-fourth at Rs 5,500 crore.

For the next financial year, the government has set a disinvestment target of Rs 72,500 crore. It plans to achieve this through public offers by state-owned insurance and railway companies and a new ETF, the official said.