Budget 2018: FinMin could raise disinvestment target to Rs 1 trn

Likelihood of outstripping 2017-18 budgeted estimate of Rs 725 bn seen as key driver; Air India sale to be marquee disinvestment action

Buoyed by the success of this year’s disinvestment programme, the Finance Ministry could set an even higher target of Rs 900 billion-1 trillion (Rs 90,000-1,00,000 crore) for 2018-19. This will encompass the sale of Air India, a number of other privatization initiatives, mergers, initial public offerings, the centre’s two exchange-traded funds, buybacks and offers-for-sale, and even monetization of land assets.

The budgeted estimate for 2017-18 is Rs 725 billion (Rs 72,500 crore), the highest ever for a year so far. With the acquisition of Hindustan Petroleum by ONGC expected to be completed soon, that target will be easily outstripped. As of January 22, divestment proceeds stood at Rs 555 billion (Rs 55,500 crore). ONGC’s acquisition of HPCL’s 51 per cent stake is valued at Rs 369 billion (Rs 36,900 crore). That would take divestment proceeds to Rs 925 billion (Rs 92,500 crore) for 2017-18.

The upcoming 2018-19 budget, to be presented by Finance Minister Arun Jaitley, while not expected to be outright populist, will still contain sops and see an increase in allocation across schemes and public expenditure. He will require resources, and disinvestment is expected to be a major one.

While Air India will be the marquee sale, expected to be completed by October 2018, the centre may sell Pawan Hans as well, among other loss-making PSUs, Business Standard has learnt. The department of investment and public asset management (DIPAM) has already created a pipeline for potential stake sale through various methods.

2018-19 divestment target may be Rs 900 bln-1 trn, highest ever by some distance

Air India privatization to be marquee disinvestment action

Privatisation of other PSUs also planned, including Pawan Hans

Further PSU mergers on the cards

IPOs, OFSs, buybacks to continue into next fiscal

State-owned construction company NBCC Ltd, which has already bought Hindustan Steelworks Construction Ltd this year, may buy other smaller construction and engineering PSUs, sources said. The candidates are Hindustan Prefab, Engineering Projects India Ltd, NPCC Ltd, and HSCC Ltd.

The centre launched its second PSU ETF, the Bharat 22 ETF in November and garneted Rs 145 billion (Rs 14,500 crore). An official said that there is still a massive interest amongst investors, and a second tranche is certain to be launched early next fiscal. There could be further tranches of its first PSU ETF as well.

The pipeline includes a number of pending IPOs as well. The names include defence companies like Hindustan Aeronautics Ltd, Garden Reach Shipbuilders, Bharat Dynamics and Mazagaon Dockyards, railway companies like Ircon, RITES, IRCTC and IRFC, and three general insurance companies. While a few of these could happen before March 31, most are slated for next year.

Preparations are being carried out for a number of OFSs as well. The plans are for a 10 per cent stake in NHPC, Power Finance Corporation and SAIL, 15 per cent in NLC, five per cent in Rural Electrification Corporation and three per cent in Indian Oil. Buybacks by PSUs are expected to continue next year as well.