Private Sector Should Look At Brownfield Investment Opportunities in CPSE Sale: DIPAM Secretary
Pandey urged them to look at brownfield acquisitions which will bring in gains in terms of increased production and job creation.
DIPAM Secretary Tuhin Kanta Pandey on Wednesday asked the private sector to explore investment opportunities in CPSEs being put on the block for privatisation, and asserted that disinvestment should be looked at more from the angle of reforms, rather than fiscal management.
The performance of CPSEs has improved because of corporate governance practices, and their shares are giving better returns to shareholders as compared to the benchmark stock market indices, he said.
Observing that Indian companies have come of age and are managing complex businesses both in India and abroad, Pandey said they need to look at brownfield acquisitions which will bring in gains in terms of increased production, and job creation.
"So, therefore, the present context of economy, where we want to go for capital formation, growth and look at this decade as India's decade, we now need to unshackle the investment opportunities. And one of the investment opportunities is from the brownfield," he said.
The statement comes a day after Finance Minister Nirmala Sitharaman asked India Inc. to shed hesitancy and take investment decisions without doubting its own capabilities.
"I would equally want to know from the Indian industry what is it they are hesitant (to invest)… We will do everything to get the industry coming and investing here... I want to hear from India Inc what’s stopping you?
“Is it like Hanuman? You don’t believe in your own capacity, in your own strength and there got to be someone standing next to you and here you are Hanuman, do it? Who is that person going to tell the Hanuman? It can’t certainly be the government," Sitharaman had said on Tuesday.
The Department of Investment and Public Asset Management has lined up over half a dozen companies for strategic sale. These include BEML, Shipping Corp, Concor, Vizag Steel, IDBI Bank, Nagarnar Steel Plant of NMDC and HLL Lifecare.
Giving the example of the privatisation of Air India and NINL and their turnaround plan, Pandey said the private sector is more forthcoming in efficiency, decision making and nimble technology. "We should clearly look at disinvestment less from the fiscal angle but more from the angle of reforms that it can bring," he added.
Pandey said there are many ongoing CPSE strategic sale transactions for which land and other non-core assets have to be demerged. "Some of the key ongoing transactions have this demerger already done or in advanced stages and following which we would be able to invite financial bids," he said.
The process of demerger in the case of Shipping Corp and BEML is at an advanced stage, while in the case of NMDC's steel plant it would begin once the plant is operational.
He said the government is looking at corporate governance in CPSEs, consistent dividend, disinvstment in a nuanced way, and focussing on privatisation transaction to get value for money and that is getting reflected in share price performance. "I think, overall we should not look at disinvestment for merely an angle of plugging fiscal resource gap and creating shareholder value," Pandey said.
In 2021-22 as against 18.30% increase in BSE benchmark Sensex, the BSE CPSE index has increased 27%. Similarly, the NSE CPSE index has given 40% returns, outperforming benchmark Nifty returns of 18.88%. The trend in share price return is continuing in the current fiscal, Pandey said.