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Depressed share value of public sector undertakings—despite markets hitting new highs—has crimped government options as it looks to offload shares of government-owned companies to meet disinvestment target for the year.

“PSU shares are not doing very well. They are doing well compared to six months ago. However, if you compare with their value one year ago or their book value, they are not doing well. This is limiting disinvestment options," a finance ministry official said under condition of anonymity.

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The book value per share of the Steel Authority of India Ltd (SAIL) stands at 100.50 while the current share price stands at 64.50. For Power Finance Corporation, the book value of 187.10 apiece is again higher than its current share price of 116.10. Besides, though the share prices of Coal India Ltd and NMDC Ltd are higher than their book values, they are lower than year-ago levels.

“The share price is best in one year in stocks such as SAIL, but is lower than book value, which is holding us back from opting for offer for sale (OFS)," he said.

Promoters of listed companies sell part of their shareholding using exchange platforms through the OFS method. It has been a popular method of disinvestment of listed PSUs for the government.

“The market movement is largely for specific stocks, especially Nifty 50 and Sensex 30. Apart from these handpicked stocks, there is no big movement in other stocks, sectors. Some PSU stocks are doing well but most of them have not benefitted from the market boom," said Dipti Lavya Swain, a cross-border corporate and mergers and acquisitions lawyer and partner at HSA Advocates.

Centre missed the disinvestment target of 65,000 crore for 2019-20 by 14,701 crore as it had to defer a number of OFS such as Coal India, SAIL, NMDC, PFC, IRCON, and Hindustan Aeronautics, which were planned towards the end of the financial year because of the volatility in equity market.

However, the government will opt for OFS in some PSU stocks and list the Indian Railway Finance Corporation (IRFC) and RailTel in the next three months in a last-ditch effort to bridge the gap shortfall with regard the disinvestment target, said the official mentioned above. The government is likely to garner close to 5,000 crore and 700 crore from listings of IRFC and RailTel.

The pandemic has derailed the government’s disinvestment plans for FY21. It has so far got 12,225 crore via minority stake sales and an initial public offer of Mazagon Dock Shipbuilders Ltd against a record target of 2.1 trillion for FY21.

Mint reported on 24 December that the Centre’s plan to sell off Bharat Petroleum Corporation Ltd to a private entity is unlikely to be sealed in the financial year ending 31 March 2021 though the transaction adviser has completed the technical evaluation of the three interested parties. This could be due to regulatory clearances needed for completing the transaction. Similarly, the privatization of Air India is behind schedule and is likely to be completed only in the next financial year.

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