DIPAM plans to mop-up Rs 25,000 Crore in April-Sept. Merchant bankers are already said to have been appointed for IRCTC, IRCON and IRFC
NEW DELHI / MUMBAI: In a bid to come close to an ambitious divestment target of Rs 72,500 crore for 2017-18, the Narendra Modi government aims to top at least Rs 25,000 crore in stake sales for April-September, the highest-ever for the first half of any year. The listing plans of three railway public sector undertakings — Indian Railway Finance Corporation (IRFC), Indian Railway Construction Company (IRCON), and Indian Railway Catering and Tourism Corporation (IRCTC) — are on track despite concerns over IRCTC giving an exemption from service charge on online tickets.
For April-June so far, the Department of Investment and Public Asset Management (DIPAM), has already garnered around Rs 6,600 crore. This comes from selling part of the stake that the government holds in Larsen & Toubro (L&T) in Specified Undertaking of Unit Trust of India (SUUTI), a five per cent stake sale in NALCO, and share buyback by IndianOil.
This means that for July-September, the Centre wants to mop-up around Rs 18,400 crore. The previous highest disinvestment proceeds for the first half of a year was around Rs 21,000 crore in 2016-17.
“In April-June, all the preparations have been put in place for stake sales, like issuing bids for appointing merchant bankers and legal advisors. Hence, in the second half onwards, you can expect a lot of action in terms of shares being offloaded in the exchanges,” said a senior government official.
For the entire year, the government is putting a strong pipeline of companies in place. It is planning to offload 10 per cent stake in NHPC, NTPC, Power Finance Corporation and Steel Authority of India, 15 per cent in NLC, five per cent in Rural Electrification Corporation and three per cent in IndianOil through offer-for-sale. At least three of these could happen before October 1, it is is learnt from sources aware of DIPAM’s plans.
There are also a number of initial public offerings being planned for state-owned rail, defence and insurance companies, including IRCTC, IRCON, IRFC, RVNL, Garden Reach Shipbuilders, Mazagaon Dock Shipbuilders, Bharat Dynamics, New India Assurance, General Insurance, National Insurance, Oriental Insurance and United India Insurance.
Of these, merchant bankers are already said to have been appointed for IRCTC, IRCON and IRFC. Which means that these could be taken to the bourses within the next three months. Also, either one or both of New India Assurance and General Insurance could also make their market debuts soon.
The Centre also plans to launch a fourth tranche of its existing central public sector enterprise exchange traded fund (CPSE ETF), as well as announce a new CPSE ETF soon. The existing ETF, managed by Reliance Mutual Fund, and has so far garnered Rs 11,500 crore for the exchequer in three tranches since March 2014. Its fourth tranche is expected to be available for subscription by investors in July or August.
The Centre will also continue selling part of the stake it holds in Axis Bank, L&T, and ITC through SUUTI this year. Cash-rich public-sector undertakings (PSUs) are expected to continue buying back stake as well.
Out of the total FY2017-18 target of Rs 72,500 crore, Rs 46,500 crore is expected to come in from minority stake sales, buybacks, mergers, public listings and through the CPSE ETF route. Rs 15,000 crore is budgeted to come in from strategic sale in PSUs and in SUUTI. The remaining Rs 11,000 crore is expected to come from the earlier-announced plans to list five state-owned general insurance companies.
According to sources close to the development, bid managers have been appointed for all the three companies and the government is likely to take a call on IRCTC’s service charge. Service charges on online train tickets were exempted from November 23, 2016, to March 31 this year to boost the digital mode of transactions among passengers. This was later extended to June 30. “We are of the belief that the government is likely to withdraw this incentive after June 30, because the company is about to be listed. This would affect the valuation of the company,” said a senior railway official close to the development.