Disinvestment rakes in Rs 21,000 crore -Governance Now

Disinvestment rakes in Rs 21,000 crore

This is the highest-ever first half disinvestment revenue for any year

GN Bureau | October 3, 2016

#Disinvestment #PSUs #Coal India #NMDC #Nalco #Manganese Ore (India) #Bharat Electronics #NBCC #State Trading Corp #MMTC #NMDC #Oil India #National Fertilizers and Rashtriya Chemicals and Fertilizers

The government has raised Rs 21,000 crore through stake sales and buybacks in April-September 2016-17. This is the highest-ever first half disinvestment revenue for any year, raising expectations for the rest of the financial year.

While Rs 16,500 crore is said to have been raised from buybacks initiated by five central public sector undertakings (PSUs), the rest has come from five PSU stake sales through the offer-for-sale (OFS) route, according to a news report published in Business Standard.

The government has budgeted Rs 56,500 crore as the disinvestment target for 2016-17. Of this, Rs 36,000 crore is expected to come from minority stake sales and buybacks, while Rs 20,500 crore is expected to come from strategic sales in loss-making or profit-making PSUs or their assets like factories, warehouses, office buildings. So far, it has already achieved 37 percent of its target.

Coal India, NMDC, Nalco, Manganese Ore (India) and Bharat Electronics are the ones which have already carried out buyback. Also, from two OFS of NHPC and Hindustan Copper and three OFS for employees of NTPC, Indian Oil and Engineers India the government has managed to raise Rs 4,500 crore.

The reason for such encouraging proceeds from buybacks is due to the Department of Investment and Public Asset Management’s (DIPAM) new guidelines released in June on capital restructuring of state-owned companies. It states that every central PSU, with a net worth of at least Rs 2,000 crore cash and bank balance of Rs 1,000 crore, will have to exercise the option of buyback of shares. Thus, more is expected through this route for the rest of the year.

DIPAM has already started issuing request for proposals for merchant bankers, or appointed them altogether, for NBCC, State Trading Corp, MMTC, NMDC, Oil India, National Fertilizers and Rashtriya Chemicals and Fertilizers. It is also planning to take four PSUs public, namely Cochin Shipyard, Hudco, HAL and RINL. The first two are expected to happen over the next few months.

DIPAM is also handling the minority stake worth nearly Rs 60,000 crore that the centre holds in Axis Bank, ITC and Larsen & Toubro through specified undertaking of the Unit Trust of India (SUUTI). It has already appointed a panel of six merchant bankers for SUUTI.

The government also plans to launch a second CPSE exchange traded fund (ETF) by December. Also, the cabinet has approved the first strategic sale by the centre in 12 years, that of Allahabad-based Bharat Pumps & Compressors.

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