Kicking off the divestment process for the current financial year, the government has cleared the sale of stakes in multiple state-owned companies. It will be offloading 10 percent stake each in PFC, SAIL, NTPC & NHPC, 5 percent in REC, 15 percent in NLC India, and 3 percent in IOC via offer for sale
If the planned sale goes through, at current market prices, the government could end up achieving nearly 48 percent of its divestment target for the year. The highest amount would be contributed by NTPC at roughly Rs 13,300 crore, followed by IOC at Rs 6,200 crore and NHPC at around Rs 4,000 crore.
To maintain its fiscal deficit target of 3.2 percent, the government had set out with an ambitious divestment target of Rs 72,500 crore for FY18. The target was to be achieved via minority stake sale totalling Rs 46,500 crore, strategic stake sales worth nearly Rs 15,000 crore, and listing of various insurance companies to add Rs 11,000.
Currently, it holds nearly 68 percent stake in PFC, 75 percent in Sail, 60 percent in REC, 57.5 percent in IOC and about 89 percent in NLC India.
The government exceeded its FY17 divestment target and garnered a revenue of Rs 46,248 crore.
However, it is now critical that the sale procedure begins at the earliest as the OFS process tends to cause volatility in the stock price. The divestment secretary, however, said a call on stake sale will be taken depending on market conditions.
"There is no indication from the government yet on timeline but it will happen at one go. We have not received any clear cut guideline but in discussion we found out that OFS would be the preferred way," said SK Acharya of NLC India in an interview to CNBC-TV18.According to V Srivatsa, Fund Manager and EVP at UTI MF, the stock price volatility due to OFS hits long term investors for no fault of theirs. Using the ETF mode of divestment would have been better.