Divestment to generate around $5-10 bn: An analysis

The Finance Ministry today announced that it will expedite disinvestment in public sector undertakings including NMDC, MMTC, Hindustan Copper, EIL, REC and NTPC. The government is looking to offload 5-10% in each company--a move that will bring in a whopping USD 5-10 billion.

Here is a verbatim transcript of Varinder Bansal's comments on CNBC-TV18. Also watch the accompanying video.

USD 5-10 billion is the highest ever which will be collected by the government by divesting stakes in these PSU companies. Most of the market experts are telling us that if the government is able to raise such amount it will mean that fiscal deficit could come down by 0.5-1%. FY10 fiscal deficit stands at 6.8% and that has been the concern for many of the market participants. If we just take the current market price and if the government divested 5% stake, they will raise about USD 5 billion. If one takes 10% they will raise around USD 10 billion, remember FY04 was the year of divestment where BJP had done major divestments and they collected Rs 15,500 crore and that was between USD 3-4 billion.

Also, in the last 18 years it is only USD 14.5 billion that the government has raised by divestment. So this USD 5-10 billion will be huge. In terms of company, NTPC and MMTC will be the companies that will be able to raise the highest sum at nearly USD 2 billion, and most of the participants are now watching out for the execution time which will be concerned with the divestment and that will be very important.