Govt kicks off 25% divestment in 5 Railway units with first sale in RVNL
NEW DELHI: The Centre plans to offload as much as 25 per cent of its stake in subsidiaries of the Railways even in the face of stiff opposition to any stake dilution in entities owned by the transport giant.
The Department of Investment and Public Asset Management (DIPAM) has already begun scouting for a registrar to manage a proposed 25 per cent disinvestment in Rail Vikas Nigam Ltd. September 21 is the deadline for submission of applications.
DIPAM officials said a similar quantum of equity will also be offloaded in the other Railway subsidiaries that have been approved for disinvestment, including IRCON International Ltd, Indian Railway Finance Corp. Ltd, Indian Railway Catering and Tourism Corp. Ltd (IRCTC), and RITES Ltd.
“RVNL is a test case. But 25 per cent stake will be sold in all the five rail PSUs. This will not only ensure better revenues, but also help improve the functioning of the firms and get them more resources,” said an official, adding that it is also to achieve the SEBI-set minimum public holding norm of 25 per cent for listed companies.
Following a Budget announcement, the Cabinet Committee on Economic Affairs had in April approved the listing of the five PSUs through public offer of shares up to 25 per cent although the “actual disinvestment of each CPSE along with the mode of raising resources has been delegated for decision on a case-to-case basis to the Alternative Mechanism”.
DIPAM officials said the Centre was keen on offloading stakes in at least RVNL and RITES this fiscal. At present, the Centre owns 100 per cent stake in all these five rail PSUs.
For this fiscal, the Centre plans to raise ₹72,500 crore from stake sales; ₹46,500 crore from minority stake sales. Till now, it has received ₹9,960.12 crore from disinvestment in PSUs including NTPC and the stake sale in L&T through Specified Undertaking of Unit Trust of India. DIPAM is expected to soon issue requests for proposal for the remaining rail PSUs as well.
The move to sell stakes in Railway arms coincides with Piyush Goyal taking over as the new Cabinet Minister of Railways.
Centre eyes Rs.2,500 crore from selling 15% stake in NLC India
With the government successfully raising about ₹9,100 crore by selling a stake in NTPC Ltd through an Offer for Sale (OFS), it is now looking at selling a 15% stake in another power producer NLC India Ltd, two people aware of the developments said.
An OFS is likely this month, said one of the two people cited above, requesting anonymity as he is not authorized to speak to reporters. The sale could fetch the government as much as ₹2,500 crore at current market prices, he added.
“They are now eyeing NLC India as the next company to bring to the market for an OFS. The stake sale could be launched in the second half of September,” he said.
As of market close on Tuesday, NLC India’s shares were priced at Rs.100 on BSE, giving the company a market capitalization of ₹16,777 crore.
The government currently owns 89.32% in NLC India. A 15% stake sale would help the government pare its stake to below 75%.
A spokesperson for the ministry of finance declined to comment on the stake sale plan.
NLC’s offer for sale is part of government’s ambitious divestment target of ₹72,500 crore for this fiscal.
As part of the plan, the government selected seven publicly-traded companies where it would look at divesting its stake through an offer for sale. These include power sector firms NTPC, NLC India Ltd, NHPC Ltd, Power Finance Corp Ltd and Rural Electrification Corp Ltd. Other companies in the list include Steel Authority of India Ltd and refiner Indian Oil Corp. Ltd
The stake sales in these firms are likely to fetch the government more than ₹30,000 crore.
On 29 August, the government launched the OFS for around 5% stake in thermal power producer NTPC, with an option to retain oversubscription for another 5%. The government eventually received bids for 7% stake.
Earlier in April, the government managed to raise around ₹2,700 crore through a 11.36% stake sale in hydropower producer NHPC Ltd through the OFS route.
Divestments have helped the government raise around ₹17,000 crore in the current fiscal year.
The ambitious divestment plan will also see the initial public offerings of several public sector undertakings.
In April, it was reported that two state-owned insurance firms New India Assurance Co. Ltd (NIA) and General Insurance Corp. of India Ltd (GIC) had hired investment banks for their respective IPOs. Both firms filed their respective draft IPO documents in early August alongwith Rail PSUs.
Other state-owned firms that have been cleared for IPOs include three defence ministry enterprises—Bharat Dynamics Ltd, Garden Reach Shipbuilders and Engineers Ltd and Mazagon Dock Shipbuilders Ltd;MSTC Ltd and Mishra Dhatu Nigam Ltd, controlled by the steel ministry; and North Eastern Electric Power Corp. Ltd, which is under the power ministry.