Budget 2026-27: Govt sets the stage for a frenzied Q4 push in disinvestment

Budget pegged miscellaneous capital receipts (MCR) for FY26 target at Rs 47,000 crore.

The Centre is gearing up for a “super-active” January–March quarter (Q4FY26) for disinvestment, with the Department of Investment and Public Asset Management (DIPAM) lining up a strategic sale of IDBI Bank, a likely minority stake dilution in Life Insurance Corporation of India (LIC) through an offer for sale (OFS), and multiple smaller PSU OFS deals – all to be executed quickly, depending on market conditions.

The Prime Minister’s Office (PMO) is frequently reviewing progress to keep disinvestment momentum high, a senior government source said.

“We are aiming for a flurry of activity in Q4. The framework is there. Now, it is the markets’ turn to deliver,” the source told Moneycontrol.

Smaller PSUs -- fertiliser, rail, shipyard -- lined up for quick OFS

Beyond IDBI and LIC, the DIPAM pipeline includes minority-stake OFS plans for smaller, “low-hanging fruit” PSUs.

The government source said that “multiple OFS are ready for launch,” and that at least two or three such PSU deals could go live in Q4, besides LIC. In addition, state-owned entities such as Rail Vikas Nigam Ltd (RVNL), Garden Reach Shipbuilders & Engineers Ltd (GRSE), and Neyveli Lignite Corporation (NLC) remain on the watchlist — for which approvals are reportedly in place.

Another transaction that DIPAM is preparing to revive is the long-pending OFS of Fertilisers and Chemicals Travancore Ltd (FACT).

The stake sale has been on the table for several quarters but did not move forward due to weak demand and internal pricing concerns. The government source said the Centre is now inclined to push it through in Q4.

“FACT OFS has been pending for long. We will likely have to do that in Q4,” the source said, adding that approvals remain in place and the issue could be slotted alongside the other quick-execution PSU OFS transactions planned for the January–March window.

“Every OFS transaction already has approvals in place. Now, it all hinges on market sentiment over the next few weeks,” he said.

The rationale behind this strategy is clear: smaller PSUs typically attract stable demand even during muted market phases, and smaller deal-sizes make institutional absorption easier. The “assembly line” approach could enable multiple OFS to run in parallel without overwhelming markets, he said.

Among pending OFS also are fertiliser firms such as Rashtriya Chemicals & Fertilizers Ltd (RCF) and National Fertilizers Ltd (NFL), where board approvals exist.

At the heart of DIPAM’s Q4 calendar lies the strategic sale of IDBI Bank. The government – along with LIC – holds more than 94 percent of the lender; the planned sale would offload about a combined 60.7 percent stake, transferring control to a buyer. This could rank among the largest banking privatisations in recent years.

LIC offer-for-sale plan

Initially, the government had considered a 2.5–3 percent stake sale in LIC via OFS. But a revision is now underway, with sources saying only a 1–2 percent tranche is likely in Q4 FY26. That would raise roughly Rs 13,000–14,000 crore, as against roughly Rs 24,000 crore that a 3 percent sale might have fetched. The decision comes amid global volatility, subdued retail sentiment and weak institutional appetite for large offerings.

Sources indicated that the PMO has been closely tracking the schedule of each transaction and seeking periodic updates. That said, the plan is not without risks. The success of the Q4 dash depends heavily on investor sentiment, global market volatility and domestic flows. The trimmed-down LIC OFS reflects this caution. “We will only press the trigger once we are confident markets can absorb these issues without undue price disruption,” the source said.

Govt’s divestment targets have lagged

The government has repeatedly struggled to meet its divestment targets. From FY24 onwards, the Budget no longer specified a standalone disinvestment target. Instead, proceeds from disinvestment and asset‑monetisation were grouped under the broader miscellaneous capital receipts (MCR) category, signalling a shift from fixed share-sale targets to a more flexible, opportunistic approach.

For FY25, the Budget Estimate for MCR was set at Rs 50,000 crore, while the FY26 Budget pegged the target at Rs 47,000 crore. In FY24, the Union Budget had initially set a disinvestment target of Rs 51,000 crore. However, the revised estimates released on February 1, 2024, removed the separate head for disinvestment receipts. Under the broader capital receipts category, the government projected collections of Rs 30,000 crore — around Rs 20,000 crore from disinvestment and Rs 10,000 crore from asset monetisation. Actual proceeds for FY24, realised through OFS transactions and employee share sales, stood at Rs 16,507.29 crore.

Historically, the government has frequently fallen short of budgeted disinvestment targets, with the exception of FY17‑18 and FY18‑19. The highest-ever mop-up was recorded in FY17‑18 at Rs 1,00,056 crore, slightly exceeding the Budget estimate of Rs 1 lakh crore. In FY18‑19, CPSE disinvestment proceeds stood at Rs 84,972 crore, surpassing the Budget target of Rs 80,000 crore.