The finance ministry, having lined up half a dozen companies to sell the government’s stake in, is also planning to tweak the disinvestment strategy by reviving Specified Undertaking of Unit Trust of India and launching public-sector exchange-traded funds.
Ministry officials agree the Budget target of raising Rs 40,000 crore (Rs 400 billion) through disinvestment this year may be difficult to meet but say the proceeds may be around Rs 24,000 crore (Rs 240 billion), if some big-ticket issues, such as those of Indian Oil Corporation and Coal India Ltd, hit the market.
The government, which raised Rs 23,920 crore (Rs 239.2 billion) in 2012-13, has also set a target of Rs 14,000 crore (Rs 140 billion) through sale of its stake in some private companies.
Among the companies likely to be disinvested in this year, the first could be Power Grid Corporation of India Ltd or IOC -- in December.
The public issue for Engineers India Ltd is scheduled for January, while that for Hindustan Aeronautics Ltd is likely to come after that.
“All options -- ETFs, offer for sale, follow-on public issue -- are available. . . but we won’t go for distress sale.
“The basket of funds has to be decided in the case of ETFs,” a finance ministry official said, adding talks were on to revive the defunct Suuti.
Suuti, through which the government holds stakes in ITC, L&T and Axis Bank, was dismantled after a Cabinet decision in March 2013.
It was decided Rs 40,000-crore (Rs 400-billion) assets would be transferred to an asset management company, which would leverage the assets to raise resources for the government.
Now, the government wants to revive Suuti so that it can sell stakes in these private companies because a Cabinet clearance is required each time shares held by the proposed AMC are to be sold.
Though foreign institutional investors had earlier this month raised some tough questions at road shows conducted in the US, UK, Hong Kong and Singapore for sale of IOC stake, the government expects to raise over Rs 4,000 crore (Rs 40 billion) through sale of equity in the firm.
Foreign investors had expressed their concern over volatility in the foreign-exchange market, subsidies and the fiscal deficit.
The government had assured them oil marketing companies would not have to take a hit on their books -- because of their Rs 1,45,000-crore (Rs 1,450-billion) estimated underrecoveries this year -- as either fuel prices would be increased or the finance ministry would part-bear the loss incurred on selling fuel below market price.
“We told them petrol had been deregulated and diesel prices were also going up by 50 paise a month.
“With the resolution of the Iran issue oil, prices would stablise,” the official added.
The investors, however, asked whether the reforms would continue even if a new government was formed after the 2014 general elections.
For IOC divestment, the road shows abroad were attended by the world’s largest fund management companies, including Singapore’s GIC; those in the domestic market are to be conducted soon.
The timing of disinvestment in Coal India, which is likely to fetch Rs 10,000 crore, has not yet been decided.
But an auction route is likely. The government had conducted road shows for CIL stake sale in the US and Singapore earlier; it was likely to do so again in other markets, the official said.
The finance ministry is expecting a good response to its public issues, given the recent stability in the currency and equity markets, as well as a greater comfort on the current account deficit front.
“A lot would depend on timing and valuation of the issues,” the official added. This year, the government has raised about Rs 1,400 crore (Rs 14 billion), but that has been due to the norm that mandates dilution of 10 per cent stake in public-sector undertakings.