The government plans to tap offer-for-sale (OFS) route for disinvestments in listed public sector enterprises during the rest of the fiscal year instead of initiating fresh strategic sales as it is likely to miss the stake sale target in FY24, for the fifth straight year.
“The OFS would depend on market conditions and would not be to meet the disinvest target,” finance ministry officials said.
They said the OFS could garner some sum, but not a substantial amount. They, however, did not indicate the firms which would be offered as part of the OFS.
The government has so far this year raised a paltry Rs 8000 crore with more than half of it coming from a 3% stake sale in Coal India Ltd through an OFS. About Rs 3,700 crore came from selling 5.36% in Rail Vikas Nigam Ltd, 4.92% in SJVN Ltd and 7% in Housing And Urban Development Corp. Ltd (Hudco) last month, all through the OFS route against the FY24 budgeted target of Rs 51000 crore as disinvestment receipts.
Moreover, the government is not in a hurry to come up with OFS to meet the public listing norms of SEBI.
According to the market regulator SEBI norms, a company is required to have a minimum public shareholding of 25 per cent within one year of the merger/acquisition of a company or three years after listing.
The Centre had amended the securities contracts(Regulation) Act for Strategic disinvestment to exempt listed companies in which the government and public sector undertakings (PSUs) together or individually hold majority stake from the minimum public shareholding norm.
Currently, some 16 listed PSUs, excluding banks, are not meeting the MPS requirement of 25 percent. A blanket exemption was given to some PSUs from MPS till August 2024.
Officials indicated that the government decided against strategic disinvestments given market conditions and also averse to strategic divestments in PSUs ahead of the general elections.
The government has cancelled the bid process for the appointment of an asset valuer for strategic sale-bound IDBI Bank on low bidder interest. A fresh Request For Proposal (RFP) would be invited soon after a review of some of the bid criteria to enable better interest from bidders.
The government, along with LIC, is selling nearly 61 per cent stake in IDBI Bank. The government and LIC together hold 94.72 per cent stake in IDBI Bank. Pursuant to the strategic sale transaction, the government will own 15 per cent stake and LIC 19 per cent shareholding in IDBI Bank, taking their total holding to 34 per cent.
Also, the government has deferred strategic sale of NMDC steel (NSL) as the strategic sale has been marred with political slugfest during poll campaign in Chhattisgarh.
The government had hoped that IDBI and NSL strategic sale would be met substantial part of the budgeted disinvestment target.
Analysts said the governments go easy on disinvestments ahead of elections since many investors are wary of possible political changes. Also, as long as the government is meeting its fiscal targets and there is not a shortfall, missing divestment targets is fine.
The privatisation delays will not impact the government’s fiscal deficit target of 5.9% of GDP, officials said.
The dividend income of the government is likely to exceed by over Rs 20,000 over the FY24 budget estimates of Rs 43,000 crore partially filling up the gap of muted disinvest receipt.
In the current financial year, around Rs 20,337 crore has been obtained through dividends from the CPSEs, which is over 47% of the full-year target, the latest Finance Ministry data showed.
Officials expressed the confidence that going by the trends so far, the Centre’s dividend receipts in FY24 from CPSEs may be around Rs 60,000 crore, 40% more than the BE.
