Power Grid to divest 20% stake via FPO

Power Grid will be selling 20 percent of its stake through the follow-on public offer (FPO) soon. Of this 20 percent, 15 percent is the company’s shareholding and the rest five percent is the government’s stake in the company, reports CNBC-TV18's Aakansha Sethi.

However, more divestments are on the cards. Apart from Power Grid, at this point in time among the government’s key divestment issues is the 10 percent stake sale in Coal India that the cabinet will take up over the next few weeks.
The government has now written to the coal ministry saying that Coal India should go ahead with a 5 percent buyback since it is a cash rich company.
Earlier the article of association was amended to allow for a buyback but the Coal India board has not given a go-ahead for the buyback. If the Coal India board gives a go ahead, then the divestment will be a buyback. If not, then the third backup is Coal India giving a special dividend to the government.
Apart from this, the other big divestment issue for this fiscal would be Indian Oil. Indian Oil is looking extremely dicey at this point in time given the volatility in the market and also the fact that the rupee depreciation has caused under-recovery to spike so much. There is no clarity on how the under-recoveries are going to be handled. Thus the government at this point in time has written to the steel ministry also saying that buyback should be considered in NMDC and NHPC.
Both these PSU boards are going to take up the issue of buyback in the near future because the buybacks are not dependent on how the market is doing and the government expects market instability to continue. Buybacks are the routes to meet that Rs 40,000 crore target of this investment in order to meet 4.8 percent fiscal deficit target.