Divestment has emerged as a priority for the government following a moderation in direct tax collections.
Key Points
- The government's divestment receipts in Q1FY27 have already exceeded the entire proceeds collected during FY26.
- The IRFC offer for sale generated about Rs 2,084 crore and received strong demand from investors.
- The Centre has achieved nearly one-third of its FY27 miscellaneous capital receipts target within three months.
- Analysts believe the government may surpass its FY27 capital receipts target amid concerns over revenue shortfalls.
- The government has accelerated PSU stake sales, completing six OFS transactions in the first quarter.
With the conclusion of the government's 2 per cent stake sale in the Indian Railway Finance Corporation (IRFC) through an offer for sale (OFS), the Centre's divestment receipts in just the first quarter of financial year 2026-2027 (Q1FY27) have exceeded the total proceeds from divestment in FY26.
The government's divestment receipts have surpassed Rs 18,000 crore (Rs 180 billion) in FY27 so far, compared to total proceeds of Rs 16,886 crore (Rs 168.86 billion) in FY26.
'The OFS for Indian Railways Finance Corporation closed with an enthusiastic response from the retail investors,' Divestment Secretary Arunish Chawla said in a post on X.
'Combined with the institutional investors, 22.88 crore shares were sold to the minority shareholders over the two trading days for an estimated amount of Rs 2,084 crores,' Chawla added.
The government had raised Rs 16,480 crore (Rs 164.80 billion) through a minority stake sale in other five public sector undertakings (PSUs) earlier this year, according to data available with the department of investment and public asset management (DIPAM).
With revenue of Rs 6,367 crore (Rs 63.67 billion) from asset monetisation along with disinvestment receipts of Rs 18,564 crore (Rs 185.64 billion), the government has met 31 per cent of its miscellaneous capital receipts target of Rs 80,000 crore (Rs 800 billion) projected in the Budget for FY27.
Divestment has emerged as a priority for the government following a moderation in direct tax collections growth to 5 per cent in FY26 from over 12 per cent in the preceding four years.
The government missed its direct tax collection target in FY26 after exempting tax on income up to Rs 12 lakh .
After meeting its divestment receipts target only thrice in a decade, the government has discontinued the practice of giving a Budget target for it since the interim Budget of FY25.
The miscellaneous capital receipts estimate in the Budget includes proceeds from disinvestment as well as asset monetisation.
However, the government's divestment programme has really gathered pace this year, mostly through minority stake sale in PSUs. Experts are of the view that the Centre may even outdo miscellaneous capital receipts target for FY27.
"The government is carrying out all these OFS when the market is relatively volatile than in earlier years. This shows an urgency on divestment side -- probably to compensate for likely revenue shortfall from other areas," Bank of Baroda Chief Economist Madan Sabnavis said.
"It is quite possible that they may exceed the miscellaneous capital receipts target," he added.
Shortfall in indirect tax and non-tax revenue is likely in FY27, according to Sabnavis.
"Some revenue slippage is possible in indirect tax due to the excise duty cut on fuel, and under-recoveries by oil marketing companies may also lead to lower dividends from them," Sabnavis said.
Government Accelerates PSU Stake Sales in FY27
The government, which had carried out OFS in five PSUs in entire FY26, has already offloaded stake in six State-owned companies through OFS in just three months of FY27.
In fact, the divestment receipts in April-June period are more than annual proceeds recorded in the last three financial years.
Besides IRFC, the government has sold stakes in Coal India, Central Bank of India, NLC India, NHPC and General Insurance Corporation of India through OFS this year.
In each of these transactions, the government has exercised the greenshoe option following strong investor interest.
Greenshoe option (or over-allotment option) is a provision that allows the issuer to offer additional equities in case of strong investor demand for the stock.
Essentially, the provision helps ensure that an issuer can efficiently manage oversubscription while maintaining price and liquidity stability.
Finance Minister Nirmala Sitharaman, after presenting the Budget for FY27, had indicated that the government would intensify measures to increase public float of central public sector enterprises this year.
Feature Presentation: Aslam Hunani/Rediff
