By Aman Shah
MUMBAI (Reuters) - India's ambitious programme this fiscal year to sell off government stakes in companies got a boost on Friday, as an offer to sell 5 percent in a steelmaker to raise $275 million saw investors bidding for twice the number of shares on sale.
The strong response from investors to the sale of shares in Steel Authority of India Ltd (SAIL) could improve prospects for other divestments, including a stock offering in Coal India Ltd, the world's largest coal miner.
Still, Prime Minister Narendra Modi seems likely to miss a target to raise $9.5 billion from divestments in the fiscal year ending in March, as resistance from staff unions and investor worries about some company-specific issues delay the process.
The fundraising from the divestment programme is crucial for the central government to meet its budget deficit target of 4.1 percent of gross domestic product this fiscal year.
Prior to the SAIL offering, the government had raised about $8.4 million, less than one thousandth of its target, by selling some of its shares to employees of two state companies, and not to institutional and retail investors.
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"It is a good sign, and the government will be confident of mobilising substantial funds for the pending divestments," said R.K. Gupta, managing director of Taurus Asset Management, referring to investors' response to the SAIL share sale.
The offering from SAIL, India's second-biggest steelmaker, got bids for more than 418 million shares at the close, more than double the 206.5 million shares on offer, according to stock exchange data.
Retail investors, who got a 5 percent discount to the bid price, subscribed for more than 2.5 times the number of shares on offer, with institutions bidding for nearly 2 times the allotted shares.
"People have accepted this disinvestment in a positive manner ... that itself is a good achievement on the part of the government," Gupta said.
With the sale of a 5 percent stake in SAIL, the government's stake in the steelmaker has come down to 75 percent.
Other divestments in the pipeline include a 10 percent stake in Coal India and a 5 percent stake in Oil and Natural Gas Corp Ltd. At their current market prices, these two could help New Delhi raise two-thirds of its divestment target.
(Editing by Sumeet Chatterjee and Mark Potter)