 "PSU divestment: Govt woos Australian, Canadian pension funds")
The government is trying a turn to Australian and Canadian pension funds to make its disinvestment plans a success, without having to overly depend on the likes of Life Insurance Corp and short-term money from foreign institutional investors (FIIs).
However, these funds do not know much about India's state-owned companies, which aren't used to sharing information, either, in the style and quantity these entities would want.
Concerned about FIIs' tendency on capital flight at the first sign of volatility in the markets, the disinvestment department has suggested prospective stake sales in public sector undertakings (PSUs) to pension funds in the two countries, to come in as long-term investors.
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Senior officials and PSU executives, earlier in the year, met these funds. The meetings in Australia were organised by Citibank and those in Canada by Deutsche Bank. Officials say funds in both countries are keen on investing in Indian PSUs. There is interest, especially from Canadian funds.
"Apart from investing in companies in developed economies, these pension funds have also invested in Latin American markets. With a slowdown there, they are looking at alternatives and India is a bright spot amidst global market turmoil," said a senior official, aware of the talks with the funds.
The problem, say officials, is that there isn't much information out there on these PSUs. These funds are used to investing in companies which hold investor and analyst conference calls at least four times a year, after the quarterly earnings statements, provide a regular outlook, always open their books to prospective investors and are based in countries with much more stricter compliance and disclosure norms than those in India.
"Essentially, the funds do their homework well. They are thorough with their research before they take an investment decision," said a second government official.
To that end, Deutsche Bank has appointed a point-person in Canada, and Citi has done the same in Australia, to communicate with pension funds on investing opportunities in these PSUs. Now, the various PSU stake sale candidates have been told by the disinvestment department that they need to improve their investor communication mechanisms, especially in the case of big institutional investors like these pension funds.
While officials did not give details, it is difficult see how the PSUs would be more transparent in their functioning unless the disclosure norms are tightened. The state-owned companies usually hold only one investor interaction, during their annual general meetings.
The biggest problem is regarding their books, as their auditing comes under the aegis of the Comptroller and Auditor General of India. It is unlikely that if a fund asks for minute financial details, these will be provided.
However, the PSUs in question have been told to work around these limitations and are likely to start actively wooing these funds. They could even hold roadshows in the two countries, especially for the pension funds.
Some of the bigger Canadian funds are Canadian Pension Plan Investment Board ($268 billion assets under management), Ontario Teachers Pension Plan ($155 bn) and British Columbia Investment Management Corp ($115 bn). Australian pension funds like Sunsuper, Retail Employees Superannuation Trust and SAS Trustee Corp are smaller compared to their Canadian peers but still handle more than $10 bn each in AUM.
The sources declined to divulge which specific pension funds the government and PSU officials held meetings with. They added that although the move to attract these was a long-term one, they were hopeful some could invest as part of this financial year's divestment programme.
For 2015-16, the Centre has budgeted Rs 41,000 crore from minority stake sale in state-owned companies and Rs 28,500 from strategic sale in unviable government assets. The government already has Cabinet approval for stake sales worth Rs 50,000 crore in 20 companies, including MMTC, NMDC, Container Corporation, Oil India, National Aluminium, Bharat Electronics, India Tourism, Hindustan Copper and NTPC. It is also in the process of appointing merchant bankers for public sector behemoth Coal India.
So far this year, the government has raised close to Rs 13,000 crore through stake sales in Indian Oil, PFC and REC.
