 "Aradhana Johri")
In an interview with Arup Roychoudhury and Jayshree P Upadhyay, Disinvestment Secretary Aradhana Johri talks about the department's performance and future plans. Edited excerpts:
The disinvestment plan for this year includes minority stake sale in public sector units (PSU) budgeted at Rs 41,000 crore and strategic sales budgeted at Rs 28,500 crore. Starting with PSU stake sales, what is your plan for that?
This year's target is higher than that of 2014-15 for the disinvestment department. It was Rs 52,000 crore (stake sale in PSUs and residual stake sale in Hindustan Zinc and Balco) in 2014-15. This year, the target is Rs 69,500 crore. If you look at the budgeted proceeds of revenue from various heads for 2015-16, this is the highest jump in annual Budget estimate.
As for meeting targets, the planning has started in December itself. Of course, the way of doing business has to change. In the past, there was an annual Plan and approvals took their own time. By the time disinvestment started, half the year was over. And, you had locked in the stocks, so, in spite of the market conditions, investors knew which stocks were up for sale and the prices were driven down.
So, we have changed the way we do things this time and started getting approvals first. We don't have an annual plan. The idea is to have a larger number of stocks, get the approvals and have a robust pipeline to sell, based on market conditions. The idea is to sell a large number of companies in the first half itself. I would like to say, however, there is still limited elbow room to sell. Because if you look at the composition of our pipeline, almost half the stocks are mines and metal stocks for which globally the markets are down. And around 25 per cent of the stocks are oil stocks, where there are issues of subsidy sharing and market conditions. These are some of the constraints we are working under. But, nonetheless the approach is to have a robust pipeline.
Wouldn't meeting a target of Rs 41,000 crore require selling a stake in the two biggest public sector behemoths, that is, Coal India and ONGC(Oil and Natural Gas Corporation)? The former has happened. Can we expect something on the latter in the coming months?
First, let me say you should see the target in perspective. From 2000 to 2014, on an average, the divestment proceeds were
Rs 9,500 crore per year. This year, we have achieved the highest ever revenue of Rs 24,200 crore. So, I would say Rs 41,000 crore is a big target.
As far as ONGC is concerned, it is a stock that is not ready for disinvestment today. It is a stock that has come down considerably in value and there are issues of subsidy sharing. When we had met investors during the road show of ONGC, the question they asked was not just what the company will pay in under-recoveries but also what is the road map for the same. Any long-term investor would like to know what are the future prospects? That is something on which we at disinvestment department need clarity upon from other departments of the government before any stake sale.
Offer for sale was the favoured route for stake sale, as FPO (follow-on public offering) takes time for regulatory approvals. Are there any plans to go the FPO route, if the time taken can be reduced?
Only the top 200 listed companies are eligible for OFS. There is a saying: 'Why fix something that ain't broken'. The problem with the FPO route is that the stock gets beaten down over a considerable period of time. As yet, the final decision on reducing FPO timelines has not been taken. Once it comes, then we will see.
What are your plans to increase retail participation in PSU divestments? Were there any discussions with the market regulator (Sebi) and the capital markets division of the finance ministry?
The government is committed to retail participation in divestment. It is not only a revenue-raising exercise but an exercise to
spread wealth. While the Sebi guidelines say the retail participation should be 10 per cent, the government has taken a policy decision to keep it 20 per cent. The market lacks depth. I have requested the finance secretary and the department of economic affairs to open more demat accounts, and launch a drive for financial literacy. With all kinds of papers expected to hit the markets this year, the retail investors should not lose out on the opportunity. My constraint or concerns over meeting the divestment targets is the demand or the market size. It is high time we start looking at that.
We understand that you had sent suggestions to Sebi on making the entire OFS process more retail-investor friendly.
Our first suggestion is to take action more upfront than just reducing the notice period for stake sales. We had sought allowing market making. We have requested the stock exchange to push financial literacy through brokers, for potential investors, and now I have sought that they should do an impact assessment. We have requested that circuit filters should be put in place when a stock is being beaten down or is getting shored up beyond a certain level. We have also suggested that we need to see that whether secondary trading of the stock in question can be suspended on the day of the OFS. Secondary trading can bring about a whole lot of swing in the price of the stock, which can be detrimental to the interest of the other retail investors.
How does the pipeline for divestment that you are preparing look like? Could you give us the name of the companies and what will be the quantum?
I would not like to take the names of companies. As far as the stocks on which we have initiated approvals, these would be more than Rs 30,000 crore. I will not be able to comment by when these will hit the markets. There is an underlying philosophy to get approvals as quickly as possible. Hammering down of stocks is one aspect we are trying to avoid. The other part of it is to initiate the process and go to markets as quickly as possible. Many divestments, for which approvals are in place, may also spill over to 2016-17, depending on market conditions.
I want to put into perspective that divestment has been a learning experience for me and the government. The biggest one so far has been Coal India, which has been the biggest single issue in a day and which has seen the highest retail and FII participation so far. It was equal to a number of issues put together. It was not just a learning experience but also a huge confidence booster.
What are your plans to increase retail participation in PSU divestments? Were there any discussions with the market regulator (Sebi) and the capital markets division of the finance ministry?
The government is committed to retail participation in divestment. It is not only a revenue-raising exercise but an exercise to spread wealth. While the Sebi guidelines say the retail participation should be 10 per cent, the government has taken a policy decision to keep it 20 per cent. The market lacks depth.
I have requested the finance secretary and the department of economic affairs to open more demat accounts, and launch a drive for financial literacy. With all kinds of papers expected to hit the markets this year, the retail investors should not lose out on the opportunity. My constraint or concerns over meeting the divestment targets is the demand or the market size. It is high time we start looking at that.
We understand that you had sent suggestions to Sebi on making the entire OFS process more retail-investor friendly.
Our first suggestion is to take action more upfront than just reducing the notice period for stake sales. We had sought allowing market making. We have requested the stock exchange to push financial literacy through brokers, for potential investors, and now I have sought that they should do an impact assessment. We have requested that circuit filters should be put in place in circumstance when a stock is being beaten down or is getting shored up beyond a certain level. We have also suggested that we need to see that whether secondary trading of the stock in question can be suspended on the day of the OFS. Secondary trading can bring about a whole lot of swing in the price of the stock, which can be detrimental to the interest of the other retail investors.
Strategic stake sale was one of the big take-aways from the Budget. What are your plans for the same?
This was a statement of intent by the finance minister. We are examining what we can do. I can't discuss the details now. The only thing that I can say is that there may be issues around valuation.
The 14th Finance Commission had some recommendations on disinvestment, including giving states a part of the proceeds, winding up National Investment Fund (NIF) and actually buying back stake in 'high priority' stocks. What is the centre's view on these recommendations? Will you accept them?
The report and the recommendations will be examined. I would certainly say on the NIF front, there would be two schools of thought. One side says it should be used for capitalisation. If the money is being put into the Consolidated Fund of India then how do you earmark? At a philosophical level, we need to examine if there is a case for these recommendations or not.
