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Business News/ Companies / News/  SBI Caps, EY, KPMG vie for advisory roles ahead of PSU acquisitions

New Delhi: SBI Capital Markets, KPMG and EY are in the fray to advise on the acquisitions of Satluj Jal Vidhyut Nigam Ltd (SJVNL) and Power Finance Corp. (PFC) by NTPC Ltd and REC Ltd, respectively, said two people aware of the development.

While the acquisition of the government’s 65.69% share in PFC by REC will help the centre net around 13,000 crore, NTPC will pay around 8,000 crore for acquiring the government’s 63.79% stake in SJVNL. The three firms are expected to make their respective presentations before the Department of Investment and Public Asset Management (DIPAM) for the role of merger and acquisition adviser.

The National Democratic Alliance (NDA) government is trying to meet its disinvestment target of 80,000 crore for the current fiscal. It has so far garnered only 15,247 crore, with its bid to privatize Air India collapsing.

“For PSUs, which occupy the same space, there is a value in integration and scaling them up. The process for appointment of advisors is on for the two acquisitions that has to be done," said the first person, requesting anonymity. “These are two big acquisitions on DIPAM’s radar for which the process is on," said the second person, who also requested anonymity.

On 24 September, news agency PTI reported that the government is considering selling its 65.61% stake in state-owned PFC to REC. Bloomberg reported on 24 March that NTPC is seeking to buy the government’s stake in hydro-power producer SJVNL.

While a KPMG spokesperson declined to comment, an SBI Caps spokesperson in an emailed response said: “As a company policy, we do not comment on speculation/mandate-related queries."

Queries emailed to spokespersons of India’s ministries of finance and power, EY, Power Finance Corp., NTPC Ltd and REC Ltd on 15 November evening remained unanswered. SJVNL, too, did not respond to emailed queries.

The Economic Times on Monday reported that the power ministry is concerned that the move will hurt the two firms.

The Union finance ministry has also sought proposals for appointing merchant bankers and selling brokers for divesting its stakes in General Insurance Corp. of India (GIC) and New India Assurance Co. Ltd (NIACL), using the stock exchange platform.

In January 2017, the cabinet committee on economic affairs had approved the public listing of five state-owned non-life insurance companies and reducing the government’s stakes in them to 75% from 100%.

Finance minister Arun Jaitley had laid down the NDA government’s disinvestment policy in his budget speech for 2016-17.

“We see opportunities to strengthen our central public sector enterprises (CPSEs) through consolidation, mergers and acquisitions. By these methods, CPSEs can be integrated across the value chain of an industry. It will give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders.

“Possibilities of such restructuring are visible in the oil and gas sector. We propose to create an integrated public sector ‘oil major’, which will be able to match the performance of international and domestic private sector oil and gas companies," he said.

In 2017-18, the government overshot its disinvestment target of 72,500 crore by garnering 1 trillion, aided by the acquisition of Hindustan Petroleum Corp. Ltd by Oil and Natural Gas Corp. Ltd for around 37,000 crore.

Share buyback by PSUs is also on the government’s radar. In 2017-18, the Centre carried out as many as 13 buybacks in cash-rich PSUs to meet its disinvestment target.

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Utpal Bhaskar
"Utpal Bhaskar leads Mint's policy and economy coverage. He is part of Mint’s launch team, which he joined as a staff writer in 2006. Widely cited by authors and think-tanks, he has reported extensively on the intersection of India’s policy, polity and corporate space.
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Updated: 20 Nov 2018, 09:33 AM IST
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