With majority of PSU stocks slumping, the Centre will struggle to reach even the revised disinvestment target of Rs 65,000 crore, which was 38% lower than the Budget estimate of Rs 1.05 lakh crore for FY20.
So far in this fiscal, the government has raised Rs 34,845 crore or about 54% of the RE. With only two weeks left for the current financial year to conclude, it is fairly certain to raise another Rs 14,000 crore from sale of the government’s entire stake in power firms NEEPCO and THDC to NTPC. In another PSU-to-PSU deal, about Rs 2,000 crore is expected from sale of the Centre’s entire stake in Kamarajar Port to Chennai Port Trusts by end-March, taking the total proceeds to Rs 51,000 crore (almost certain).
With coronavirus and its adverse impact on financial markets worldwide affecting valuations of CPSEs as well as valuation of SUUTI holdings in Axis Bank and ITC, the Centre has limited headroom to garner revenues from buybacks, offers for sale (OFSs), initial public offerings (IPOs) or selling a small portion from SUUTI’s holdings.
Even if some PSUs undertake buybacks, it won’t fetch more than Rs 2,000 crore. Similarly, OFSs are now uncertain unless stock prices recover sharply from recent lows.
Earlier, the Centre had plans to sell minority stakes in half-a-dozen CPSEs – Coal India, Cochin Shipyard, Hindustan Aeronautics (HAL), Bharat Dynamics (BDL), Mishra Dhatu Nigam (MDNL) and Garden Reach & Shipbuilder Engineers (GRSEL). In the past one month, share prices of most CPSEs declined sharply, with Coal India falling over 14% and Cochin Shipyard by 31%. So, OFSs in any of these companies in the next two weeks would depend on recovery of their share prices.
Sale of a portion of SUUTI’s stake in blue chip private companies – Axis Bank and ITC – would have helped the Centre meet the disinvestment target for this fiscal, had their stock prices not declined by close to 30% (31% dip in Axis Bank share price and 28% in ITC) in the past one month.
The current value of the government’s stake held through SUUTI in Axis Bank (4.598%) and ITC (7.929%) is about Rs 20,951 crore at Monday’s price on the BSE, compared with Rs 29,525 crore on February 17, a 29% decline in value.
“It is difficult to sell SUUTI stakes in these companies at the prevailing market prices,” an official said.
The Centre had garnered Rs 85,000 crore in disinvestment receipts in FY19, Rs 5,000 crore more than the target for the year.