Disinvestment plan to pick pace, 3 rail IPOs to hit market soon

New Delhi: The government’s disinvestment programme is set to get into top gear in the balance period of current fiscal. A slew of market offers, including IPOs of three railway units — Rail Vikas Nigam, Indian Railway Finance Corporation and Ircon International— are coming up in the next one month.

Also in the offing is offer for sale of up to 10 per cent government stake in over a half a dozen companies, including Hudco, NTPC, NBCC, MMTC, Hindustan Copper, NMDC and Bharat Electronics. A debt exchange traded fund (ETF) is also proposed to be launched soon.

Having lost out valuable time since the start of FY19 when a limited number of share sale offers hit the market, the government now wants to pack the time between now and Diwali to give a leg-up to its disinvestment programme. The aim is to reach 75 per cent of the disinvestment target by Diwali in November.

The government has targeted to raise Rs 80,000 crore from PSU disinvestment in the current fiscal but has so far raised only Rs 9,219.91 crore.

“We had a splendid run in the first quarter but disinvestment definitely slowed down in second quarter period till now. With improved market conditions, a slew of equity sale offers of PSUs would hit the market between now and November till Diwali. We are on course to reach 40-50 of disinvestment target by September and 75 per cent by November,” the Department of Investment and Public Asset Management (DIPAM) secretary Atanu Chakraborty told Financial Chronicle.

While declining to give details of companies to hit the market soon, Chakraborty said that three IPOs would be launched in just about a months’ time and investors would be provided new instruments to actively participate in disinvestment.

“A positive aspect of our disinvestment programme this year has been less reliance on support from Life Insurance Corporation (LIC). The quality of offers should allow the trend to continue for future offers as well,” the DIPAM secretary said.

The government is divesting 10 per cent stake each in Rail Vikas Nigam, Indian Railway Finance Corporation and Ircon through initial public offers (IPOs).

While Rail Vikas Nigam and Ircon offers could mobilise Rs 500 crore each, Indian Railway Finance Corporation offer can fetch the government about Rs 1,000 crore. The Rail Vikas Nigam offer has already got the Sebi approval, while other two are expected to get it soon.

Besides rail CPSEs, the other PSUs which have filed draft papers with Sebi are Indian Renewable Energy Development Agency (Ireda), Mazagon Dock Shipbuilders, Garden Reach Shipbuilders & Engineers. The other IPOs expected include that of MSTC and North Eastern Electric Power Corporation Ltd (NEEPCO).

Government officials said that apart from rail PSUs, five more IPOs may be planned by November.

The government is planning to sell up to 10 per cent stake each in real estate firms Hudcoand NBCC, as also 3 per cent in NTPC, through an offer for sale (OFS), which could fetch about Rs 5,900 crore to the exchequer. Another 5 per cent government shares in BEL will be sold to mobilise between Rs 1,300- 1,500 crores. Also, further sale of government shares in companies such as NMDC, Coal India (CIL), BHEL, Hindustan Copper may be considered.

Even though strategic sale in Air India has been postponed, government hopes to put other entities such as Scooters India and Pawan Hans under this route. There are around 24 firms lined up for strategic sale in this fiscal.

Chakraborty said that strategic sale target has been kept modest and it should be achieved easily.

With regard to debt ETF the idea is to use it as an investment management initiative for creating value as the government will not raise any proceeds from this.

Apart from market offers, the disinvestment programme for FY 19 could again see some profitable cash rich PSUs going in for buyback of government shares. In FY 18, around 13 companies, including Oil India Ltd, Bharat Electronics Ltd, Hindustan Aeronautics and IRCON went for buybacks.

The government has so far mobilised Rs 9,219.91 crore from disinvestment proceeds that includes sale of 25 per cent stake through IPO of Mishra Dhatu Nigam Ltd (MIDHANI) to mobilise Rs 434.14 crore, Rs 460.51 crore by selling 12.60 per cent stake through RITES IPO and Rs 8325.26 from Bharat 22 ETF.