All market options open on divestment: Centre

Only 78 days left in financial year, govt scrambles to meet rest 60% of target

The Narendra Modi government plans to take a shot at the ambitious disinvestment target set for the 2016-17. The Centre has set an ambitious disinvestment target of Rs 56,500 crore and has so far achieved around Rs 23,000 crore, or 40 per cent. It is worth mentioning that the government has invariably fallen short of the meeting the disinvestment targets in the past.

A senior official in the Department of Investment and Public Asset Management (Dipam) said the government has all the options on the table including strategic share sale, minority disinvestment and further stake sale in Suuti (Specified Undertaking of the Unit Trust of India) in order to meet the disinvestment target set for 2016-17.

"With little over two-and-a-half months left in the current fiscal, we will try our best to achieve the disinvestment target," said Manish Singh, joint secretary, Dipam. "There could me more minority stake sales through offer for sale (OFS), strategic disinvestments or Suuti stake sale," he added without divulging names of specific companies.

Another Rs 6,000 crore is set to be added to the government's 2016-17 disinvestment kitty as it will launch a second tranche of the CPSE ETF next week. The government will pare small stakes in the 10 companies that form the ETF.

The success of the CPSE ETF will take this year disinvestment tally to a record level of Rs 29,000 crore. Since 1991-92, the highest amount the government has mobilised in a financial year is around Rs 24,000 crore in 2015-16 thanks to a mega share sale in oil marketer Indian Oil Corporation and in 2012-13 when it had divested nearly Rs 11,500 crore worth of shares in the power utility NTPC.

Unlike previous occasions, this time around the government has raised bulk of the disinvestment proceeds (nearly Rs 16,000 crore) through the share buyback route instead of actual disinvestment.

Singh said given the market conditions buybacks were best suited for disinvestment and hence, the government opted for that instead of conventional methods like share sales through OFS.

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So far this fiscal, the benchmark Sensex has gained around seven per cent. The public sector undertaking (PSU) stocks have done better than the benchmark gauge, however, the market has remained quite volatile during this time, making it challenging for disinvestment.

The government could look to divest further stakes in PSUs such as Coal India, MMTC, NBCC, where its shareholding is high. The centre has to bring down shareholdings in all listed PSUs to at least 75 per cent before August 2017 to meet Sebi's minimum public shareholding requirement. Singh said the Dipam is working towards meeting this requirement.

Besides this, launch of another CPSE ETF, initial public offering (IPO) of Housing and Urban Development Corporation (Hudco) and share sales in Axis Bank, ITC and Larsen & Tourbo (L&T) held by Suuti are the options before the government.

The centre filed Hudco's offer document with Sebi end-December to divest 10 per cent stake. Singh said whether or not Hudco IPO happens this fiscal will depend on how soon the company can obtain Sebi approval.

Last year, the government had appointed ICICI Prudential Mutual Fund to launch another CPSE ETF. Singh said the ETF could happen before April and there could be some overlap in the underlying securities with the CPSE ETF that was launched in 2014.

Market players said if the government has real shot at the Rs 56,500-crore target if it is able to divest part of the Suuti holdings. At current market rate, Suuti holdings in Axis Bank, ITC and L&T was valued at Rs 56,631 crore.