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Home / News / India /  Disinvestment receipts cross revised FY21 target

Disinvestments of public sector undertakings (PSUs) fetched the government 32,835 crore in FY21 through offers for sale (OFS), buybacks and three initial public offerings (IPOs) in a pandemic year that derailed its initial plan to raise 2.1 trillion.

The last disinvestment for FY21 was the 15% stake sale in Rail Vikas Nigam Ltd via an OFS that brought 543 crore. The government stake in the PSU now stands at 75.68%.

The largest disinvestment of the fiscal year was 8,847 crore, when the government sold its entire 26.12% stake in Tata Communications Ltd (TCL). “The company became big. The stock price has gone up four times within a year. So, we got tremendous amount of value from exit from the company," a finance ministry official said under condition of anonymity.

The TCL sale marked the government’s exit from the erstwhile Videsh Sanchar Nigam Ltd (VSNL), a central public sector enterprise that was privatized in 2002. At the time of its privatization, the government had sold a 25% shareholding along with transfer of management control to Panatone Finvest Ltd, which was named the strategic partner. Subsequent to the disinvestment, VSNL was renamed TCL.

The disinvestment process was completely stalled in the first five months of FY21 due to the pandemic, forcing the government to lower the target to 32,000 crore. “In August, we had zero disinvestment receipts. When we started in September, the markets were devastated for PSUs. Only a few stocks such as telecom and pharma had gained. Now, PSU stocks are also back on track and so is our disinvestment," the official said.

On 30 December, Mint reported that depressed levels of PSU stocks, despite the markets hitting new highs, had limited the government’s options to offload shares of PSUs to meet its disinvestment target for the year. Shares of many PSUs such as Steel Authority of India Ltdand Power Finance Corp. Ltd traded below their book value, preventing the finance ministry from offloading its stake through OFS where promoters of listed companies sell part of their stake on stock exchanges. It has been a popular method of disinvestment of listed PSUs for the government.

Despite missing the budget target of 2.1 trillion by a huge margin, FY21 was still a breakout year for disinvestment in many ways. “We have not done disinvestment indiscriminately in FY21. We have stuck to whatever we promised to the market. We didn’t sell stocks through exchange-traded funds. We did three IPOs, RailTel Corp. of India Ltd, Indian Railway Finance Corp., and Mazagon Dock Shipbuilders Ltd, all of which were pending since 2017. It is a record as far as bringing new stocks to the market is concerned, that too in a covid year," the official said.

The finance ministry has yet again set an ambitious disinvestment target of 1.75 trillion for FY22, mostly through privatization and strategic disinvestment. A lot will depend on how the privatization of Bharat Petroleum, Air India and the IPO of Life Insurance Corp. of India go.

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