The Centre on Tuesday invited expression of interest (EoI) for its 63.75% stake in Shipping Corporation of India (SCI), worth about Rs 2,600 crore at the present marketplace rates, adding 1 more central public sector enterprise (CPSE) to the pipeline of state-owned firms becoming place on the block. The final outright sale of a CPSE by the government was carried out way back in FY04.
While sale of SCI and rail PSU ConCor may spill more than to the subsequent fiscal, oil retailer BPCL and, likely, loss-creating carrier Air India are most likely to be sold to strategic purchasers this year itself. In addition, a clutch of major-ticket IPOs would hit the marketplace this year and a couple of buybacks of shares by CPSEs are most likely. However, the government’s non-debt capital receipts will nonetheless be way under the ambitious Rs 2.1 lakh crore target.
The disinvestment receipts so far this year have been about Rs 12,380 crore or 6% of the annual target.
The receipts this fiscal are most likely to be about Rs 1 lakh crore at least Rs 60,000 crore is anticipated to be mopped up from BPCL disinvestment, provided that the sale will be at a premium to present marketplace rates.
However, subsequent year could prove to be a watershed year in privatisation, provided the new strategic sector policy on the anvil and comments produced by senior government functionaries in current weeks that the privatisation approach would be more ambitious. Of course, provided the sudden fall in income buoyancy due to the Covid-19 pandemic, the government has no choice but to augment asset sales and privatisation, in order to steer clear of a major rise in borrowing levels.
In the two-stage approach, the final date for submission of EoI for SCI is February 13, 2021. The shortlisted bidders will be asked to place monetary bids in the second stage. The transaction will most likely materialise in the subsequent monetary year.
The SCI stock closed at Rs 86.9, up 5.27% from the prior close on the BSE. SCI posted a net profit of Rs 336 crore in FY20 and `479 crore in H1FY21. According to terms, bidder/s for SCI should have a net worth of Rs 2,000 crore. The government has barred other CPSEs from participating in the transaction. The organization, which owns a fleet of 59 vessels, is involved in the enterprise of transporting goods and passengers.
Interacting with an sector body, finance minister Nirmala Sitharaman final week stated efforts to disinvest some of the major organizations have been on track and the Centre would make a lot of progress in this regard by finish-FY21.
Recently, the government received EoI from possible purchasers for its 52.98% stake in BPCL and one hundred% in Air India. The sale of the national carrier could fetch the government only up to Rs 3000 crore, post the buyer’s takeover of component of the airline’s debt.
On November 16, 3 bidders showed interest for BPCL buyout — Vedanta, Apollo Global Management and Think Gas. The Centre’s stake in BPCL is worth about Rs 43,000 crore at Tuesday’s closing value on the BSE.
The approach is on in spite of the BPCL stock losing 28% in worth from about Rs 60,000 crore in November 2019, about the time the stake sale proposal was authorized by the Union Cabinet. However, the actual receipts will rely on valuation and consideration of a premium.
On December 14, the government has received ‘multiple’ EoIs for its one hundred% stake in AI which includes from Tata Group, US-primarily based NRI firm Interups and two AI employee groups, sources have stated. The monetary bids for AI will be at the enterprise worth (marketplace worth of debt and equity) and will comprise at least 15% in money payment to the government and debt takeover by the bidders equivalent to 85% of the worth quoted.
Among other disinvestment routes, the listing of Indian Railway Finance Corporation and RailTel may well fetch about Rs 4,600 crore and Rs 1,000 crore respectively.
While two CPSEs have currently purchased back a portion of their shares, seven more, which includes NTPC, NMDC, Coal India and MOIL are anticipated to obtain back shares from the government and other shareholders by March 31, 2021. Together, NTPC and NMDC buybacks could fetch about Rs 2,200 crore to the Centre.
While bulk of the shortfall from targeted disinvestment receipts will be due to a deferment of the mega IPO of Life Insurance Corporation (a 10% stake sale could have fetched about Rs 80,000 crore), delay in floating of EoI for the Centre’s 30.8% stake sale in Container Corporation and IDBI Bank would push these transactions to subsequent monetary year. After clarity on land leasing policy from Indian Railways that has to be authorized by Cabinet, the EoI for ConCor stake (worth about Rs 7,250 crore at present marketplace rates) will be invited. Similarly, the government is but to invite bids for its 47.1% stake in IDBI Bank worth about Rs 17,200 crore at present marketplace rates. IDBI stake sale could also be pushed to subsequent monetary year.
With tax revenues to fall quick of target considerably, maximising non-debt capital receipts will be of immense assist for the Centre to preserve spending momentum to boot financial activity amid most likely 7.5% contraction in actual GDP in FY21.