Highest-ever Apr to Sept divestment proceeds at Rs 21K cr

The government has managed to rake in Rs 21,000 crore through stake sales and buybacks in April-September this year, the highest-ever first half disinvestment revenue for any year by a good margin, thus, raising expectations for the rest of 2016-17.

Of this, Rs 16,500 crore is said to have come from buybacks initiated by five public-sector undertakings (PSUs), while the rest has come from five PSU stake sales through the offer-for-sale (OFS) route, Business Standard has learnt.

The previous highest divestment proceeds for the first six months of a financial year was in 2015-16, when the Centre garnered nearly Rs 13,000 crore. This year’s haul, so far, exceeds that of April-September 2015 by more than Rs 8,000 crore. The total budgeted disinvestment target for the year is Rs 56,500 crore. Of this, Rs 36,000 crore is expected to come from minority stake sales and buybacks, while Rs 20,500 crore is expected to come from strategic sales in loss-making or profit-making PSUs or their assets like factories, warehouses, office buildings, etc.

The proceeds, so far, for April-September are already at 37 per cent of the combined target and 58 per cent of the minority stake sale and buyback target.

The five PSUs, whose boards had approved the buybacks earlier this year and which have carried them out, are Coal India, NMDC, Nalco, Manganese Ore (India) and Bharat Electronics. The five stake sales from which Rs 4,500 crore has been raised include two OFS, namely NHPC and Hindustan Copper, and three OFS for employees of NTPC, Indian Oil and Engineers India.

The Centre has raked in Rs 2,700 crore from NHPC and Rs 400 crore from Hindustan Copper stake sales this year. Senior government officials confirm the rest has come in from OFS for employees for the three companies mentioned above.

The reason for such encouraging proceeds from buybacks is due to the Department of Investment and Public Asset Management’s (DIPAM) new guidelines released in June on capital restructuring of state-owned companies. The guidelines state that every central public sector enterprise (CPSE), with a net worth of at least Rs 2,000 crore, cash and bank balance of Rs 1,000 crore, will have to exercise the option of buyback of shares. Hence, more is expected through this route for the rest of the year.

Senior finance ministry officials have expressed confidence that this could be a bumper year for disinvestment and that the Centre could come the closest it ever has to the budgeted targets. Economic Affairs Secretary Shaktikanta Das told Business Standard last month that the stake sale targets for the year will be achieved.

Already, DIPAM has started issuing request for proposals for merchant bankers, or appointed them altogether, for NBCC, State Trading Corp, MMTC, NMDC, Oil India, National Fertilizers and Rashtriya Chemicals and Fertilizers. It is also planning to take four PSUs public, namely Cochin Shipyard, Hudco, HAL and RINL. The first two are expected to happen over the next few months.

DIPAM is also handling the minority stake worth nearly Rs 60,000 crore that the Centre holds in Axis Bank, ITC and Larsen & Toubro through Specified Undertaking of the Unit Trust of India (Suuti). It has already appointed a panel of six merchant bankers for Suuti.

The government also plans to launch a second CPSE exchange traded fund by December. Additionally, the Cabinet, led by Prime Minister Modi, approved the first strategic sale by the Centre in 12 years, that of Allahabad-based Bharat Pumps & Compressors.