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Divestment commitment fails to enthuse markets, analysts

Divestment commitment fails to enthuse markets, analysts
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First Published: Tue, Jul 07 2009. 01 15 AM IST

Public floats: The Centre may divest more public sector units this fiscal. Harikrishna Katragadda / Mint
Public floats: The Centre may divest more public sector units this fiscal. Harikrishna Katragadda / Mint
Updated: Mon, Jul 13 2009. 04 41 PM IST
New Delhi: Although finance minister Pranab Mukherjee reiterated his government’s intention to divest stake in state-owned enterprises, he did not spell out a clear road map.
“While retaining at least 51% government equity in our enterprises, I propose to encourage people’s participation in our disinvestment programme,” Mukherjee said presenting the Budget for 2009-10 in Parliament on Monday, without elaborating.
Mukherjee also said state-controlled banks and insurance firms will remain in the public sector and would receive all manner of support including capital infusion.
Finance secretary Ashok Chawla, however, said in a briefing after the Budget speech that the government would start its divestment programme by selling stake in two energy sector public firms.
Public floats: The Centre may divest more public sector units this fiscal. Harikrishna Katragadda / Mint
Mukherjee also revived an earlier proposal of the finance ministry to increase the threshold for public shareholding for all listed firms.
To introduce greater transparency and public participation in the stock market, the finance ministry in early 2008 had issued a discussion paper proposing to raise the public shareholding limit for listed companies to at least 25% from 10%. The proposal was never taken forward after the stock markets went into a downswing, dampening the market for public offerings.
“The average public float in Indian listed companies is less than 15%. Deep non-manipulable markets require larger and diversified public shareholdings. This requirement should be uniformly applied to the private sector as well as listed public sector companies,” Mukherjee said.
The government has set a target for disinvestment proceeds of Rs1,120 crore for the fiscal to 31 March 2010, compared with Rs1,165 crore in 2008-09. The state enterprsies listed for disinvestment of a small portion of equity this fiscal include RITES Ltd, Cochin Shipyard Ltd, Telecommunications Consultants India Ltd, Manganese Ore India Ltd, Rashtriya Ispat Nigam Ltd and Satluj Jal Vidyut Nigam Ltd.
The divested amount will be transferred to the National Investment Fund (NIF). The government has constituted the NIF in the public account of India, into which the proceeds from disinvestment of government equity in select firms is channelised. NIF funds are managed by investments in selected public-sector mutual funds to provide sustainable returns without depleting the corpus. The transactions have been so accounted to make it deficit-neutral.
Harsh Pati Singhania, president of industry lobby group Federation of Indian Chambers of Commerce and Industry, said that his organization would have liked some concrete proposals is disinvestment.
Kaushal Sampat, chief operating officer of business credit information provider Dun and Bradstreet, India, said while disinvestment could have found greater articulation, there seems to be a “positive movement” in that direction.
Similarly, Mark T. Robinson, chief executive of Citi South Asia, said he is hopeful the government would in the near term announce more elaborate policy measures on key issues like divestment, foreign direct investment and financial sector reform. However, Tushar Poddar, vice-president and chief economist, Goldman Sachs, said a more clear-cut articulation about disinvestment was unreasonable. “The Budget is a fiscal document and we think the short-term policy objective of stimulating demand will likely be achieved by this budget,” he said.
Later, addressing the customary briefing after the budget speech Chawla said state-owned Oil India Ltd and NHPC Ltd will hit the capital market with their initial public offerings in August and September.
“Four more companions based on overall framework and design will be identified (for disinvestment) by the department of disinvestment in consultation with ministries,” he said. Sale of the government equity as specified by President Pratibha Patil in her address to a joint session of Parliament and by the finance minister in his Budget speech will proceed in a phased manner, the finance secretary said.
PTI contributed to this story.
asit.m@livemint.com
Graphics by Ahmed Raza Khan / Mint
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First Published: Tue, Jul 07 2009. 01 15 AM IST