Government looking to push stake sales in smaller companies to drive selloff

NEW DELHI: The government is looking to push stake sales in smaller state-run companies as part of a revised strategy aimed at meeting its ambitious disinvestment target. Officials said public issues of blue-chip firms such as NTPC and Oil and Natural Gas Corporation may be slipped in between issues of smaller firms such as National Buildings Construction Corporation (NBCC) and SJVN.

The disinvestment department, which has approvals for about 20 public issues worth Rs 50,000 crore, is working out a road map with an aim to bring one issue each month. Since the beginning of this fiscal, the government has been able to bring only one issue, that of Rural Electrification Corporation, raising Rs 1,600 crore through a 5% stake sale. The disinvestment agenda has received a setback on account of choppy market conditions.

The benchmark stock index, Sensex, slipped to an eight-month low of 26,523.09 on June 8 on concerns over deficient monsoon and increase in oil prices. The index has regained some ground since then, closing at 27,115.83 on Thursday. Some of the issues that may be pushed within the next two months under the new plan may include those of Power Finance Corporation, NBCC and State Trading Corporation of India.

"So far, the first quarter of this fiscal was more devoted to getting all clearances in place. Now that we have a pipeline, we can quickly rollout the smaller issues," said a finance ministry official. Finance minister Arun Jaitley, who is visiting the United States, will also interact with investors, which may provide a further fillip to the disinvestment agenda, said the official, requesting not to be named.

​​Jaitley, who is on a nine-day visit to the US, will be addressing a select gathering of portfolio managers from foreign institutional investors as well as officials from banks, insurance and pension funds. The government will further push those companies where it currently holds around 90% stake, and which needs to be brought down by 2017 in order to meet the mandated 25% public holding norm prescribed by the market regulator, Securities and Exchange Board of India. "It is necessary to maintain momentum throughout the year and whenever market conditions augur well, we will offload the bigger issues," the official said.

This will help the government inch closer to the mammoth disinvestment target of Rs 69,500 crore, of which Rs 41,000 crore is to come from stake sales in state-owned companies, the official said. Last month, among a list of issues, the cabinet had approved 10% stake sale in the country’s biggest refiner and fuel retailer, Indian Oil Corporation, and 5% in power producer NTPC. Approvals are already in place for 5% stake sale in ONGC. At current valuations, the government may be able to raise about Rs 28,000 crorefrom stake sale in these three blue-chip firms.

The government also has cabinet clearances for 5% stake sale in Bharat Heavy Electricals and 10% stake sale in both National Mineral Development Corporation and National Aluminium Company Limited. Experts said that the government will need to price smaller issues attractively to generate interest. "That will be the key to get these issues rolling. It is still early in the fiscal and the government can work around these issues," said Jagannadham Thunuguntla, head of fundamental research at Karvy Stock Broking.