Centre may meet disinvestment target of Rs 51,000 crore for FY24

IDBI Bank, Concor key for realisation, otherwise it may have to resort to offer for sale

The government could meet its Budget target of realising Rs 51,000 crore from disinvestment in the current financial year even if it does not take any fresh public sector undertaking for stake sale, provided plans for IDBI Bank and Concor go through.

The government plans to sell Life Insurance Corporation of India (LIC) and its combined stake of 60.72 per cent in IDBI Bank, which would give it Rs 35,765 crore, going by the current market cap of the company. IDBI share was up 1.41 per cent at Rs 55.39 in the morning trade on Thursday on BSE.

The government owns 45.48 per cent stake in IDBI Bank and LIC holds 49.24 per cent equity in the lender. The government plans to divest its 30.48 per cent and LIC’s 30.24 per cent stake in the bank.

Expressions of interest (EoIs) for picking up a majority stake in the lender closed in January. The potential bidders have since begun due diligence on the bank.

A Reuters report said the Reserve Bank of India (RBI) has begun evaluating at least five potential bidders interested in buying a stake in IDBI Bank.

The two other small disinvestments — BEML and Shipping Corporation of India Ltd (SCIL) — would give the government another around Rs 4,300 crore.

The disinvestment of both the companies is at an advanced stage.

The process in the Bengaluru-headquartered BEML, which has three business verticals — defence and aerospace, mining and construction, and rail and Metro — was delayed due to the recent Karnataka elections and a few other hiccups.

At the current share price of Rs 1,414.35 in the morning trade on Thursday, 26 per cent stake sale in BEML could fetch the government Rs 1,532 crore.

SCIL, which is engaged in operating bulk carriers and crude oil tankers, would give another Rs 2,837 crore to the government if it succeeds in divesting its 63.75 per cent stake. The share price of SCIL was up slightly at Rs 95.26 in the morning trade on BSE.

However, these three stake sales would add up to Rs 40,134 crore only, which is around Rs 11,000 crore less than the targeted revenues from disinvestment for 2023-24.

To fill the gap, the government will have to speed up the disinvestment process in Concor or opt for offer for sale (OFS). It is also planning to sell stakes in NMDC Steel Ltd, HLL Lifecare, Vizag Steel and Hindustan Zinc Ltd.

The government has collected only Rs 49.63 crore from OFS (employees) so far in 2023-24.

The government plans to sell its 30.8 per cent stake in Concor, which is engaged in the business of providing inland transport by rail for containers, management of ports, air cargo complexes and cold-chains. This would give the government Rs 12,392 crore at the current share price of Rs 664.55 in the morning trade on BSE.

The four stake sales — IDBI, BEML, SCIL and Concor — may give the government Rs 52,526 crore which is a bit higher than its budget estimates.

However, EoIs for Concor — the first step in the disinvestment process — are yet to be invited.

The finance ministry had cut its disinvestment target from Rs 65,000 crore in the Budget estimates for 2022-23 to Rs 50,000 crore in the revised estimates. However, it could collect only Rs 35,293.52 crore from disinvestment in the year.

Business Standard recently reported that the government is unlikely to undertake any new public sector undertaking disinvestment — including privatisation of public banks — in 2023-24 (https://www.business-standard.com/companies/news/new-asset-sale-transactions-unlikely-in-fy24-says-senior-govt-official-123051801119_1.html).