New Delhi: A core group of secretaries on disinvestment, headed by the cabinet secretary, will soon take up proposals for strategic disinvestment from a list of public sector units (PSUs) submitted by government think tank Niti Aayog.

“Government is considering the suggestions of the NITI Aayog and will take a view on a case-by-case basis. After the core group of secretaries gives its nod, the proposal will go to the Cabinet Committee on Economic Affairs for a final view after which the process of strategic stake sale will begin," a finance ministry official said, requesting anonymity.

NITI Aayog has submitted two lists to the government—one of loss-making state-run units to be shut down and another for strategic disinvestment. The lists have not been made public.

Strategic stake sales should happen sooner than later through a transparent and open process so that there is no accusation of distress sale, said Prithvi Haldea, founder and chairman of Prime Database, a primary market tracker.

“First, the government should sell the loss-making PSUs which have no chance of revival. Then profitable PSUs not strategic in nature should be sold. However, the government should ensure the compensation package for the employees of such PSUs under the voluntary retirement scheme is reasonable," he added.

Controlling stake sales in Hindustan Zinc Ltd and Balco to London-based Vedanta Resources Plc. between 2001 and 2003, during the National Democratic Alliance government led by then prime minister Atal Bihari Vajpayee became controversial for allegedly not following due procedure. The Supreme Court in January 2016 prohibited the government from selling its residual 29.5% stake in Hindustan Zinc.

The government has set a divestment target of 56,500 crore for fiscal year 2016-17, of which 36,000 crore is expected to come from minority stake sales in state-owned companies and 20,500 crore is expected to be raised through strategic sales in both profit-making and loss-making state-owned companies.

So far, the government has garnered 3,183 crore from minority stake sales in NHPC Ltd, Indian Oil Corporation Ltd and NTPC Ltd.

The government has lined up stake sales in two fertilizer companies—Rashtriya Chemicals and Fertilizers Ltd and National Fertilizers Ltd. It has also announced its intention to sell stakes in iron ore mining company NMDC Ltd, state-owned trading firms MMTC Ltd and State Trading Corporation of India Ltd, and Oil India Ltd.

The government has also initiated the process of selling its remaining stakes in Specified Undertaking of the Unit Trust of India (SUUTI), an offshoot of the erstwhile state-run investment firm Unit Trust of India (UTI), by inviting bids from bankers for the mandate to manage the stake sales in ITC Ltd, Larsen and Toubro Ltd (L&T) and Axis Bank Ltd in the first phase within a period of three years. Bankers have been asked to submit their proposals by 10 August.

It holds an 11.17% stake in ITC, 8.16% in L&T and 11.53% in Axis Bank. SUUTI’s holding in ITC is worth 33,909 crore, in Axis Bank 14,819 crore and in L&T 12,058 crore.

The bankers who win the mandate will advise the newly created department of investment and public asset management on the sale of the shares held in the three companies either through a offer for sale, block deal, bulk deal, regular sale through stock exchange or any such other mechanism subject to the guidelines of the Securities and Exchange Board of India.

The finance ministry official cited earlier said the SUUTI stake sale will be done prudently, without giving a time frame. “We will appoint bankers for three years. We have included all options of stake sale. The bankers will have an advisory role and may be used for valuations of the eight unlisted and 40 other listed companies," he added.

Close