Deutsche Bank was the only foreign bank that applied to manage the asset sales.
“The second basket size is worth almost ₹ 10,000 crore," said one of the two persons. Stake sales in the companies that are in basket one could fetch the government almost ₹ 9,500 crore, based on the 15-day average price of the five stocks.
Receipts from stake divestments have been estimated at ₹ 41,000 crore this year. Also, additional resource mobilization of ₹ 28,500 crore has been estimated from strategic divestments to meet a revenue shortfall.
In 2014-15, the government had set a target of ₹ 63,425 crore through stake sales, of which it collected only ₹ 31,350 crore, including ₹ 5,000 crore from the sale of special drawing rights to the Reserve Bank of India.
Even though government divestments form a sizeable chunk of primary market issuances, investment bankers hired for these issues hardly make any money off these.
Typically, investment banks, which charge between 2% and 3% of the issue size as their fee in share sales by private companies, quote extremely low fees to manage government asset sales, sometimes as low as ₹ 1.
“This happens because of the way the system is designed where you have technical bids and then financial bids, where everyone has to match the lowest bid to get the chance to manage these issuances," said Prithvi Haldea, chairman of Prime Database, a primary market data tracker.
Investment banks participate in managing government asset sales even at these low fees because staying out would affect their league table rankings, Haldea said.