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In a bid to cash in on the equity market bull run, the NDA government has approved divestment in state-owned ONGC, Coal India and NHPC, which is expected to fetch close to Rs 45,000 crore this financial year. The share sales are part of the government’s divestment programme outlined in the Union Budget through which it hopes to raise about Rs 56,000 crore in fiscal year 2014-15. The Cabinet cleared a 5 percent stake sale in ONGC, 10 percent in Coal India and 11.36 percent in NHPC. The divestment will be taken up through the offers-for-sale (OFS) route. At current market valuations, this would raise Rs 19,000 crore (ONGC), Rs 23,600 crore (Coal India) and Rs 2817 crore (NHPC), amounting to a total of about Rs 45,417 crore. Analysts expect investors to lap up shares of the bluechip PSUs, riding on the Modi wave. Retail investors are also expected to actively participate, especially since there is likely to be 20 percent quota for them (higher than the 10 percent mandated by Sebi), and a 5 percent discount to the issue price.
The positive outlook is despite these PSUs having underperformed the benchmark indices over the last few months
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CHART CHECKONGC is expected to hit the market later in the year but only after the government announces its policy on gas pricing. Uncertainty over gas pricing and also a lack of transparent subsidy-sharing formula have been two major concerns for investors. The stock has been flat (0.23 percent) since May when the new government came to power, even as benchmarks Sensex and Nifty have been attaining new highs virtually every other day.
Coal India Coal India, world’s largest coal miner, has been struggling to keep pace with the country’s rising demand for the mineral, leading to growing imports from the global markets. Chairman A.K. Dubey recently told reporters that the company is looking at a production of 615 million tonnes (mt) of coal by 2016-17 “in an optimistic scenario”, as against 462.42mt produced in 2013-14.
Shares of Coal India are down over 13 percent over the last four months.
NHPCNHPC has been dogged by cost over-runs due to delays in receiving environment and other regulatory clearances. The expenditure on the projects-Teesta Low Dam IV (West Bengal), Subansiri Lower (Assam), Parbati II (Himachal Pradesh), Nimmo Bazgo and Uri II (Jammu and Kashmir)-which are in various stages of construction, has exceeded the amount that was initially sanctioned.As per a PTI report, NHPC generates 5,702 MW electricity from 17 hydel stations in the country and is also constructing 4,095 MW worth of projects.Shares of the hydel power company are down 23.09 in the last four months.
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