We are not following traditional process on disinvestment, says Neeraj Kumar Gupta
3 min read 05 Feb 2017, 11:55 PM ISTThe department of investment and public asset management is no longer just a divestment department, its focus is management of investment, says Neeraj Kumar Gupta
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New Delhi: The divestment target set in the budget 2017 is challenging but the department will strive to meet it using a mix of different approaches, said Neeraj Kumar Gupta, secretary, department of investment and public asset management, in the ministry of finance. Speaking at a Mint-CNBC TV18 post-budget event, Gupta outlined the department’s approach on managing government investments. Edited excerpts:
On the stiff divestment target of Rs72,500 crore for 2017-18:
The department is no longer just a divestment department. Its focus is management of investment. The government considers all investments in public sector enterprises as one of the variable assets. Divestment is one of the processes for management of these assets.
This time the focus is on activities. The insurance sector will be divested. Listing of companies—big sized, mid-sized, profit making central public sector enterprises will become absolutely time bound. Mergers and acquisitions (M&As) were not taking place in the public sector. But, in 2016, nearly Rs6 lakh crore (trillion) of mergers and acquisitions took place in India in the private space. In the public sector, two mergers which are in recent memory is Hindustan Steel Works Construction and merger of the subsidiaries with SBI (State Bank of India). (The) focus is to improve the value chain, integrate the value chain, create economies of scale and create companies which are competitive in the world.
We are not following a traditional divestment process. We have been doing offers for sale or OFSs. We have done 11 transactions this year, garnering nearly Rs31,000 crore. And the year has not yet ended. ETF (exchange- traded fund) has been announced. The success of it can be gauged by the fact that 2.7 lakh retail investors participated in the issue, cornering nearly 41% of the Rs6,000 crore issue. This shows that there is an appetite in the retail segment, which we want to deepen now. In the 11 transactions that we have done, there have been hardly any bailouts.
There has been better participation of DIIs (domestic institutional investors), FIIs (foreign institutional investors) and retail. We really want to divest professionally. These four points should be kept in mind in the backdrop of the targets. There is a lot of activity space left for us. Targets have to be challenging. But we have to live with them and we have to meet them.
On creation of an oil behemoth in India:
Per se, the policy does not suggest M&A as a panacea. But wherever there is economic justification, depending upon the profile, business operation and financial strength of the company, M&A should be explored. I don’t think many M&As are possible but definitely there is scope. Every sector should explore this possibility to improve the value chain and valuation of the company.
On the listing pipeline:
Mention of the three railway companies (in the budget speech) is more indicative and not exhaustive. The policy per se suggests that listing is the best way to unlock the value of the company and share the wealth with the people. You provide them access to capital markets and if the market valuation is on their side, then sky is the limit for their operations. For listing, attempt will be that all possible candidates parallel progress for listing. Responsibility has to be shared with administrative ministries to ensure time-bound listing. Since 2009, six have been listed. Four are in the pipeline. Many more will come up.
Niti Aayog has given us suggestions on which can be candidates for strategic sales. Some in-principal decisions have been taken and they are proceeding as per timelines.
On stake sale in Hindustan Zinc:
We have to differentiate from disinvestment in CPSEs from such units where we have residual stakes. There are sectoral issues.
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