LIC IPO proceeds account for over half of disinvestment achieved so far in FY23. What to expect in budget 2023?
3 min read 29 Jan 2023, 05:38 PM ISTDIPAM's data revealed that so far in FY23, CPSEs disinvestment is to the tune of ₹31,106.64 crore --- which would be 47.85% of the budgeted estimates of ₹65,000 crore for FY23.Of the total disinvestment receipts achieved so far in FY23, strategic sale in LIC via IPO accounted for nearly 66%.
PremiumThe government is expected to most probably not meet its disinvestment target set for FY23. In the current fiscal, so far, the Centre's disinvestment receipts are over ₹31,100 crore, accounting for nearly 48% of the budgeted target. Proceeds from the IPO of the largest insurer in India, LIC accounts for more than half of the achieved disinvestment so far. In Budget 2023, the disinvestment target is likely to be modest or unchanged from the previous one.
DIPAM's data revealed that so far in FY23, CPSEs disinvestment is to the tune of ₹31,106.64 crore --- which would be 47.85% of the budgeted estimates of ₹65,000 crore for FY23.
As per the data, strategic sale in LIC through an initial public offering (IPO), the proceeds came in at around ₹20,516.12 crore --- for accounting 65.95% of the disinvestment receipts achieved by the government so far in FY23. LIC IPO is the largest ever in the Indian market. LIC's public offer opened on May 4 and closed on May 9th of last year. The IPO received subscribed by 2.95 times on the final day with healthy demand from across investor categories.
Among other key notable disinvestments were --- ₹3,839 crore which is from a stake sale in Axis Bank via SUUTI, ₹3,026.23 crore, and ₹2,723.73 crore in ONGC and IRCTC through an offer for sale (OFS). Also, disinvestment receipts of ₹497.27 crore and ₹471.5 crore came from a portion of stake sales in GAIL (India) and Paradeep Phosphates.
Yes Bank economists in their report said, "disinvestments in PSU entities were anticipated at ₹650 billion in FY23BE. Till date, the government has garnered ₹311 billion or 48% of its target. More than half of the disinvestment proceeds raised so far have come from the IPO of LIC, whereby the government had raised INR 210 bn by selling a 3.5% stake in LIC."
For the entire fiscal year 2022-23, Yes Bank's economists expect the government to achieve disinvestment receipts of ₹40,000 crore. However, they believe the government will pencil yet again a ₹65,000 crore disinvestment target in FY24 as well. Hence, no change from the previous budget.
Also, Axis Securities in its note said, "FY23 Disinvestment receipt is expected to be lower than the BE and based on the last couple of year’s track record." But the brokerage expects disinvestment estimates for FY24 likely to be modest.
According to Yes Bank's economists, for FY24, the focus will be to carry out the disinvestment process that has been already approved by the cabinet including IDBI Bank, ConCor, BEML, Shipping Corporation of India, NMDC Steel, HLL Lifecare, and PDIL.
Overall, the economists said, this Budget would have the daunting task of progressing towards consolidation after the covid related fiscal push. On the other hand, an eye needs to be kept on economic growth in an atmosphere of slowing global growth and tightening domestic financial conditions. On a strategic level, the broad reform process should continue with outlays earmarked for rural development, boosting manufacturing, employment generation, and capacity building through infrastructure.
Finance Minister Nirmala Sitharaman will present the Union Budget FY23-24 on February 1st and it would be the last full-year budget before the Union Election 2024.
Despite this being the last Budget before general elections, the economists said, "we do not anticipate much in terms of tax dole-outs for the masses. For FY24E we anticipate the Budget deficit to increase to ₹17.8 trillion, GFD/GDP to print at 5.9% (after attaining the 6.4% target for FY23BE). Net and gross borrowings are likely to increase in FY24E to ₹11.7 trillion and ₹15.4 trillion respectively. Despite RBI pausing after another 25bps hike in February 2023, we see a scope for yields to rise in H1FY24 towards 7.60-7.75% as centre targets to front-load borrowings in H1."
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
