Moneycontrol
Last Updated : Aug 21, 2018 12:18 PM IST | Source: Moneycontrol.com

Govt may ask PSUs to create special purpose vehicles to monetise non-core assets: Report

To select the assets the official said that government may hand over the task to NITI Aayog.

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To monetise the non-core assets of public sector entities government may ask these firms to create special purpose vehicles (SPV) to house their non-core assets, reports Bloomberg Quint.

According to a senior government official, public-sector companies may have to move land holdings and other non-core assets into these SPVs under the institutional framework being considered by the Department of Investment and Public Asset Management.

What are non-core assets?

Non-core assets are defined as assets that are either not essential or simply no longer used in a company's business operations. Non-core assets are often sold when a company needs to raise cash. Some businesses sell their non-core assets in order to pay down their debt.

Under the new mechanism, companies identified for strategic disinvestment where the government is willing to cede control will include state-run companies. Once the new framework is put in place, assets moved to the SPVs can be automatically monetized.

What are SPVs?

A special purpose vehicle/entity is a subsidiary company with an asset/liability structure and legal status that makes its obligations secure, even if the parent company goes bankrupt. An SPV/SPE is also a subsidiary corporation designed to serve as a counterparty for swaps and other credit-sensitive derivative instruments.

After the new policy comes into force the official said it is also expected to help close strategic sales. He further added that the framework would also nudge asset-heavy state-run enterprises to monetise assets.

To select the assets the official said that government may hand over the task to NITI Aayog. A draft note would be circulated among ministries for consultation.
First Published on Aug 21, 2018 12:18 pm
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