Exit from 51 PSUs can fetch govt 7 times disinvestment goal of Rs 1.05 trn

Strategic buyers to be key for realising optimum valuations

The disinvestment proceeds for the government could be in excess of Rs 7 trillion if it decides to exit from the 51 listed public sector units (PSUs) operating in non-strategic sectors, such as oil marketing, steel, railways, shipping, coal mining, and energy, showed an analysis by domestic brokerage Nirmal Bang.

This is much higher than the government’s disinvestment target of Rs 1.05 trillion for 2019-2020. Analysts say the huge divestment potential can help the government generate large sums of revenue for the foreseeable future.

However, merchant bankers say to realise optimum valuations of its holdings in these PSUs, the government would need to look for strategic buyers in these companies instead of selling stake in the open market.

“The market does not have the kind of liquidity to absorb selling of such large holdings. This could lead to price distortion as well. Also, PSUs are operating in varied sectors and some of these are not doing so well. So, selling to a strategic buyer is likely to fetch optimum valuations,” said Pranjal Srivastava, independent capital market professional.

Further, the analysis showed that if the government decided to cede control, but still retain sizeable stake, it could fetch Rs 4.4 trillion by diluting stake to 26 per cent. If the government wanted to retain control and maintain 51 per cent stake, the revenues for the exchequer would stand at Rs 1.3 trillion.  

Recently, Bharat Petroleum Corporation (BPCL) received the go-ahead from the government, to look for strategic buyers, with the former looking to exit the company.

At current market capitalisation of Rs 1.13 trillion, the government’s 53.29 per cent stake in BPCL is valued at Rs 60,539 crore.

While the deal is expected to be completed by March next year, analysts say that getting strategic buyers is likely to be a long-drawn process.

The brokerage report pointed out that reducing stake to 51 per cent in listed PSU banks and government-owned insurance companies can bring in Rs 1,400 crore in the government’s kitty.

Stake sale in unlisted in PSUs and Specified Undertaking of Unit Trust of India stake sale can lead to Rs 2,000 crore of receipts for the government.