New Delhi: “India aims to sell shares of about 60 state-run firms in the coming years, with offers for NTPC and Rural Electrification Corp expected by end-March 2010,” disinvestment secretary Sunil Mitra said on Friday.
Mitra also said that the finance ministry was in talks with other ministries to launch public offers for Steel Authority of India, miner NMDC, Coal India Ltd and telcoms firm BSNL.
Analysts said that it may not boost sentiments as appetite may be lacking for follow-on offers of listed firms unless shares are offered at a discount, but would help cut fiscal deficit.
Investors were expecting faster progress in stake sales along with reforms in insurance and banking sectors after the Congress Party-led coalition was re-elected with a stronger majority at the April-May general elections.
Scanty rainfall and floods briefly shifted policy focus to taming food price inflation in the last two months, but ministers have said recently reforms would be speeded up and more state-run firms would be taken up for stake sales.
Last week, the cabinet approved a long-pending divestment policy that mandates at least 10% public holding in state-run firms and use the proceeds for social schemes until March 2012, to cut its fiscal deficit.
“There are 10 public sector enterprises (PSEs) with less than 10% public holding. There are around 50 PSUs that are unlisted and that have recorded net profit in the last three years,” Mitra said, referring to companies that qualify for stake sales in the coming years.
He did not give details of the amount that could be raised.
“What this means for the market is that there is going to be good supply of securities but that does not mean a bullish trend,” said V.K. Sharma, head of private broking and wealth management at HDFC Securities.
“With a plethora of public offers you can’t play up the market. In case of follow-on offers, I don’t think there will be large appetite unless they are offered at a discount,” he said.
Shares of SAIL were up 3.3% and NTPC rose 0.35% in a firm Mumbai market, the benchmark index of which closed up nearly 1%.
Since August, share sales in state firms NHPC and Oil India have raised about $1.8 billion.
“A 5% stake sale in state-run Indian power producer NTPC could fetch the government more than three times the Rs2700 crore it got five years ago when it offloaded 5.25% of shares,” Mitra said, indicating the share sale could fetch at least Rs8100 crore.
“The government would consider offering retail investors shares in state-run firms at a cheaper rate and could also look at auctioning shares to qualified institutional buyers (QIBs) or big investors,” Mitra said.
“The finance ministry was also in touch with regulators to fast track clearances of the public offers, he said.
“Disinvestment seems to be picking up momentum. In the current year, it is the only way they can rein in the fiscal deficit as tax revenues are not going to be buoyant,” said N.R. Bhanumurthy, economist at National Institute of Public Finance and Policy.
India’s fiscal deficit is set to widen to 6.8% of gross domestic product in fiscal year 2009-10, from 6.2% a year ago, on duty cuts and stimulus spending.