There will be huge retail demand for the divestment offerings since the shares will be offered at a discount and the companies have a solid track record, says Haldea
The divestment process so far this year has been disappointing and the government needs to change its approach if it has to meet its target this fiscal, feels primary market expert Prithvi Haldea.
In an interview with CNBC-TV18, Haldea says the government should sell the shares to retail investors at a 12-15 percent discount to market.
There will huge retail demand for the offerings since the shares will be offered at a discount and the companies have a solid track record.
He says the stake sales in Hindustan Zinc and Balco should not pose any problem.
Below is the transcript of Prithvi Haldea’s interview with Anuj Singhal and Ekta Batra on CNBC-TV18.
Anuj: We haven’t seen any kind of move from the government on divestment front yet and now there is again a talk of seeking higher dividends from profitable PSUs. How are you reading the whole situation?
A: The disinvestment process this year has been very disappointing, quite like the last year where government failed to materialise anything substantial and ultimately had to resort to a lot of ingenious means. We have had a very buoyant secondary market ever since May, even before that but if you look at the divestment process we have just been able to achieve just about less than Rs 2000 crore against a target of Rs 54,000 crore.
We have seen throughout the year a lot of announcements – company names have been put up in the public domain, Oil and Natural Gas Corporation (ONGC), Coal India and very recently now we are talking of IOC. Nothing is really happening on the ground. Now, we are just two and a half months away from the end of the year and trying to raise Rs 40,000-50,000 crore from the market in such a short period of time is going to lead to a lot of stress both from the issuer’s perspective as well as from the investor’s perspective.
The government and the finance minister appear very confident because if you look at the statements that have recently come out, the government seems to be very confident of achieving these targets. I hope these are met because we desperately need to move ahead on this. Very interestingly the government has given even a stiffer target for next fiscal which is Rs 65,000 crore. All of this according to me is achievable; [but] we will have to rethink the entire divestment process.
The OFS method where you announce first of all a company’s intention two-three weeks in advance, the market starts beating the price, the price falls down by 5-15 percent, then the government does not feel comfortable to do an offering at the lower price. I think we will have to rethink this process. This is not worked well because ultimately you will have to then depend on LICs and the kind for taking on these offers.
I have also been advocating that we should think of retail seriously, we have been professing the lack of retail investors in the Indian capital market. The best ever opportunity to get millions of new investors is through the divestment process because a retail investor who is not into the market, he is looking at two things basically, he is looking at the quality of company and the price. The quality of companies is not under question, the government should look at a 10-15 percent healthy discount, not a 5 percent which can evaporate in a day’s time.
Ekta: Do you think that ONGC and may be Coal India still have some hope this fiscal or either one of them?
A: ONGC currently because of the oil prices and all there are question marks but Coal India I think we should push because in case we are not able to push these big ticket divestments then the target is going to be not achieved. IOC can fetch you at the best Rs 7000-8000 crore.
In addition to that the government should seriously rethink about selling the SUUTI stake which can easily raise Rs 20,000-25,000 crore and the government has no rational for holding onto those stocks. Also, proceed very aggressively with the balance sale of shares in BALCO and Hindustan Zinc, those two companies have had a good fortune and the pricing is very attractive for the government and these have been on the back burner for a long time.
So, I think between SUUTI, Hindustan Zinc, BALCO, IOC and maybe Coal India in case we have got to focus on these five items then the target is very achievable.