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The government will begin an ambitious yearly disinvestment drive on Wednesday by selling a five per cent stake in Rural Electrification Corporation (REC).
This will be followed by Power Finance Corp, a five per cent stake sale in which is likely to hit the markets on Monday, sources said.
In his 2015-16 Budget, Finance Minister Arun Jaitley targeted Rs 41,000 crore from minority stake sales in listed public sector undertakings (PSUs) and a further Rs 28,500 crore in ‘strategic sales’. This combined target of Rs 69,000 crore is the highest ever disinvestment target of a government for a single financial year.
REC, PFC and other listed stake sale candidates are likely to be sold through the offer for sale route. The floor price for REC has been set at Rs 315 a share and it is expected to get Rs 1,588 crore. That of PFC, largest lender to the power sector, would fetch Rs 1,803 crore. It has market capitalisation of Rs 36,070 crore.
PFC’s shares ended 1.6 per cent down at Rs 273.24 on Tuesday. REC closed at Rs 321.65, down 4.2 per cent.
Others in which a five to 10 per cent stake might be divested over the coming months are Dredging Corp Of India, Indian Oil, Bharat Heavy Electricals, National Aluminium, NMDC, MOIL, NHPC and Oil & Natural Gas Corp (ONGC), among others. Cabinet approvals have already been given and Requests For Proposals for merchant bankers have been issued for these companies.
Some others whose case could go to the Cabinet for minority stake sale this year are Neyveli Lignite, SJVN, Hindustan Copper, MMTC and India Tourism Development Corp. This is based on the list of companies in which the Centre holds more than 75 per cent stake (it will have to bring it that threshold by 2017, according to Securities and Exchange Board of India guidelines).
Apart from these, there is also a list of 65 loss-making central public sector enterprises, presented by Heavy Industries Minister Anand Geete last month. The candidates for strategic sale will be drawn from that list, which includes HMT, ITI, Air India, Mahanagar Telephine Nigam, Madras Fertilizers and Scooters India.
In a post-Budget interview with this newspaper, Disinvestment Secretary Aradhana Johri had said: “In terms of the stocks we have initiated approvals for, the pipeline would be more than Rs 30,000 crore.” However, it is clear that even this amount will not be met without ONGC, on which a large chunk of the divestment target hinges.
A five per cent stake sale in ONGC was planned for 2014-15 but got delayed because of depressed oil prices and the wait for an expected subsidy sharing mechanism change between the government and upstream companies. That wait continues and sources say a five per cent stake will fetch Rs 13,620 crore, based on Tuesday’s market cap.
For 2015-16, the Centre has revamped its divestment plan. Instead of the usual practice of seeking cabinet and regulatory approvals in the first half of the year, and selling the stakes in the second half, the department has already got or will receive the bulk of approvals by the end of April.
Sources say the aim is to divest stakes in at least two companies each month, if the steep target is to be met. Hence, in what will definitely be uncharted territory for finance ministry planners, the first six months might well see the bulk of the stake sales.
