Govt changing disinvestment strategy to target companies in infrastructure and defence

08 Oct 2015 Evaluate

In order to target the companies that are aligned with the India growth story for fetching foreign funds, Finance Ministry is looking to tweak the disinvestment strategies and wants to bring in front of the queue the companies particularly in the sectors such as infrastructure and defence where a substantial amount of foreign investment is expected. Further the government may defer divestments in struggling sectors such as metals and commodities commanding poor valuations due to China slowdown, as the government looks to raise a record amount from disinvestment this year.

Economic affairs secretary Shaktikanta Das recently said that an internal strategy for disinvestment has been discussed and the government will maximize the disinvestments receipts for the current financial year. Firms such as Engineers India Ltd (EIL), Bharat Electronics Ltd (BEL) and Container Corp. of India (Concor) are likely to be advanced on divestment schedule.

Reportedly the department of disinvestment had bundled stocks of 10 state runs firms into two baskets and asking the merchant bankers to bid for managing the share sale of all the companies in a group. The first basket includes Oil India, Concor, National Mineral Development Corporation (NMDC), Metals and Minerals Trading Corporation of India (MMTC) and India Tourism Development Corporation (ITDC) where the government has not yet appointed merchant banker. However, the second basket comprises of NTPC, EIL, BEL, National Aluminium Co (Nalco) and Hindustan Copper where merchant bankers have been appointed.

The government has started the road shows for four foreign locations which includes US and Britain, with the aim to attract buyers for the proposed disinvestment powers for India’s largest utility National Thermal Power Corporation Limited (NTPC) and defence company BEL. Under the road show the government could raise around Rs 5,300 crore from a 5 per cent stake sale in NTPC at current valuations. A 5 per cent stake sale in Concor and BEL may fetch a total of around Rs 3,000 crore. The government's holdings in Concor and BEL are 61 are 61.79 per cent and 75.02 per cent, respectively.

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