Govt to start fiscal 2015 divestment drive with $275 million SAIL share sale

By Manoj Kumar and Aman Shah

NEW DELHI/MUMBAI (Reuters) - India will kick off its ambitious divestment programme for the current fiscal year, key for meeting the budget deficit target, with the sale of a 5 percent stake to raise up to $275 million in state-run Steel Authority of India Ltd (SAIL) on Friday.

The floor price for the share auction of SAIL has been set at 83 rupees apiece, compared with Thursday's closing price of 85.25 rupees. The steel maker's stock has risen 18.2 percent this year, lagging a near 36 percent rise in the broader market.

Prime Minister Narendra Modi seems likely to miss a target to raise $9.5 billion from divestments in the fiscal year ending in March, as resistance from staff unions and investor worries about some company-specific issues delay the process.

The government has so far raised about $8.4 million, less than one thousandth of its target, by selling some of its shares to employees of two state companies, and not to institutional and retail investors.

"The target that the government has set is a tall target," said Deven Choksey, managing director at Mumbai-based brokerage KR Choksey Securities. "They still have some time before the financial year ends ... given proper planning, I would think they would be in a position to get the subscriptions through."

The government, which owns an 80 percent stake in SAIL, plans to sell up to 206.5 million shares through an auction on the stock exchanges on Friday, according to a regulatory filing on Wednesday.

Investors' response to the SAIL stake sale will be crucial for the government to gauge investor appetite ahead of the planned sale of a 10 percent stake in Coal India Ltd and a 5 percent stake in Oil and Natural Gas Corp Ltd.

The Coal India and ONGC stake sales should help the government raise a combined $6.2 billion, as per the current market prices.

In the SAIL offering, retail investors will get a discount of 5 percent on the issue price, a senior finance ministry official said, adding the government expects to raise 15-17 billion rupees from the sale.

(Editing by Sumeet Chatterjee and Mark Potter)