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Photo: Reuters
Photo: Reuters

Opinion | Stake sale hurdles

With both aviation and oil sectors in crisis after covid-19 paralysed much of the world, it was unrealistic to expect buyer enthusiasm for Air India and BPCL

On Tuesday, the government extended the bid submission deadline for Air India’s sale by two months to 30 June. Earlier, its effort to offload a big stake in Bharat Petroleum Corp. Ltd had run into trouble. With both aviation and oil sectors in crisis after covid-19 paralysed much of the world, it was unrealistic to expect buyer enthusiasm for these state-owned companies. Given the economic uncertainty, analysts are not betting on a smooth disinvestment run this year.

In theory, quick sell-offs could help the Centre raise the money needed for a robust fiscal stimulus package. With demand for assets so low, however, we may need to find other ways to extract value from them. One suggestion that has been made is to place these assets in a special purpose vehicle (SPV) so that large loans can be taken against this SPV’s value, with this debt to be paid off when its holdings are privatized later. If these companies are valued transparently, while raising such loans, the idea could work. Else, it might ignite a public controversy. Only an open auction for shares can identify what a publicly held company is worth, and that seems difficult to do right now.

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