FinMin to soon invite bids from merchant bankers for CPSE mergers

Kickstarting the process of merger and acquisition (M&A) among CPSEs, the Finance Ministry will soon invite bids from merchant bankers and legal firms to handle consolidation, starting with two such deals.

Even though the CPSEs for M&A have not been finalised yet, the Department of Investment and Public Asset Management (DIPAM) is keeping the process ready so that when a formal proposal is received from the administrative ministry, they can begin the process without losing any time.

"The merchant bankers who would bid would have to handle two such deals. The names of the CPSEs selected for M&A would be provided to merchant bankers and legal advisors before or at the time of the pre-bid meeting, an official told PTI.

Once the proposal comes from the administrative ministry, it would go to the Core Group of Secretaries on Disinvestment (CGD) and then to the Cabinet, the official added.

With less than 6 months left for the fiscal to end, DIPAM is fast-tracking the process to achieve the Rs 800 billion budgeted target. So far, the government has mopped up over Rs 92 billion from PSU stake sale through IPO, OFS and ETF.

According to another official, the government is looking to sell its 65.61 per cent stake in state-owned Power Finance Corporation (PFC) to Rural Electrification Corporation (REC), which could fetch the exchequer about Rs 130 billion.

At the end of 2017-18 financial year, the total resources of REC stood at over Rs 2.46 trillion, of which 'Reserves and Surplus' stood at Rs 335.15 billion. The net worth of the company stood at Rs 354.9 billion and 'cash and bank balance' was at Rs 17.73 billion at the end of March 2018.

The REC-PFC deal is being considered on the lines of acquisition of government's entire 51.11 per cent stake in oil refiner HPCL by state-owned ONGC in 2017-18. The government got Rs 369.15 billion from the stake sale.

Finance Minister Arun Jaitley had in Budget 2017-18 said there are opportunities to strengthen CPSEs through consolidation, mergers and acquisitions.

"By these methods, CPSEs can be integrated across the value chain of an industry. It will give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders," he had said.