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Government looks to meet 75% of FY19 selloff target by December

New Delhi: The government is looking to complete nearly three-fourths of its disinvestment target by the end of December and has a pipeline of about 15 companies in which it will sell stakes to achieve this interim goal.

The government has so far raised around Rs 9,200 crore against the target of Rs 80,000 crore for FY19. It will need to generate another Rs 50,000 crore more to reach the Rs 59,000 crore year-end objective. The companies lined up for stake sales include NTPC, Coal India, MMTC and three railway firms.

“In some firms we will offload as low as around 5% for quick realisation. There will be a mix of offerings through offers for sale (OFS) and initial public offers (IPO),” said a senior finance ministry official.

Three to four firms are also expected to go in for buybacks, a strategy used in recent years to tap into the surpluses of staterun enterprises.

Companies taking the listing route include North Eastern Electric Power Corp. (Neepco) and MSTC Ltd in which the government will sell 25% stake each through IPOs.

It will sell 10% stake each in state-run real estate and construction companies NBCC and Housing and Urban Development Corp through the OFS route.

“We are also looking to come out with a further fund offer (FFO) of the existing CPSE Exchange Traded Fund as it has done exceedingly well in the past,” said the official cited above. CPSE stands for central public sector enterprises.

Since its inception in 2014, the government has raised around Rs 11,500 crore through this route in three tranches. The government raised Rs 2,500 crore last year through FFO-2.

The government is also expecting some cash-rich companies to opt for buybacks. It will set up a debt exchange-traded fund (ETF) to help them raise funds for capital expenditure requirements so that even after buybacks they have money to spend.

“We don’t want them to just rely on their surplus cash,” said the official. “The proposed debt ETF will leverage the aggregate strength of these selected central public sector enterprises and public sector banks which will lead to smoothening of their borrowing plans and enhance the investor base.”

The government is also open to consolidation among CPSEs along the lines of the Oil and Natural Gas Corp. (ONGC)-Hindustan Petroleum Corp. (HPCL) deal. ONGC bought the government's entire 51.11% stake in oil refiner HPCL for Rs 36,915 crore last year.

“There are a few candidates but the final call will be taken by the respective administrative ministries,” he said, adding that there was some interest from NTPC on taking over hydroelectricity generator SJVN Ltd.

Strategic sales of around five or six companies are also expected to go through by the third quarter of this year, the official said. Some of the firms in advanced stages include Bharat Pumps & Compressors Limited (BPCL) and Scooters India Ltd.

In FY18, government exceeded its disinvestment target for the first time and raised Rs 1,00,056.91 crore against the revised target of Rs 1 lakh crore and the initial budget estimate of Rs 72,500 crore. In FY17, it raised Rs 46,247 crore against the revised target of Rs 45,500 crore. In FY16, the government raised Rs 23,996 crore from asset sales.