Govt won't rush on stake sales in PSUs

Finance Minister Pranab Mukherjee says the Centre would not create a situation in the market where the shares of PSUs get "underpriced".

Finance Minister Pranab Mukherjee on Tuesday said the Centre would not rush with the disinvestment of public sector companies and create a situation in the market where the shares get "underpriced".

He said as part of the economic reforms process initiated by the government, "dinsinvestment is broadly on track and the initial public offering (IPO) of Coal India Ltd which raised Rs15,200 crore has been an unqualified success". "However, the Rs40,000 crore that the government proposes to raise through disinvestment in the current financial year is an indicative target," the finance minister explained.

Addressing the Economic Editors' Conference, Mukherjee said, "The government will not saturate the stock market and cause prices to crash. We will not do anything to distort the market." He said the government had expected to raise only Rs35,000 crore from the 3G (third generation) telecom spectrum auction.

"I did not expect that the auction would cross the Rs 100,000 crore mark," he remarked. The finance minister made it clear that the timing of the proposed disinvestment of various PSUs would be governed by the market conditions to fetch the best price and not on meeting the Rs40,000-crore target for the current financial year.

According to the background paper prepared by the finance ministry for the economic editors' conference, the government proposes to dilute its stake in seven more firms during the current fiscal. The public issue of PowerGrid is expected in the second week of November and of Manganese Ore India Ltd (MOIL) towards the end of November.

That would be followed by the Shipping Corporation of India (SCI) in the first week of December, while the public subscription of Hindustan Copper would open in the second week of December. The department of disinvestment is hopeful of achieving the Rs 40,000 crore number, it added.

The new year is expected to begin with the 20 per cent follow on offering of Indian Oil Corporation ( IOC) in January, followed by SAIL's disinvestment in February.

The FPO by way of disinvestment of five per cent of paidup capital of SAIL in conjunction with the issue of fresh equity of equal size of the company is expected to open for public subscription in February, 2011.

The stake sale in Oil and Natural Gas Corporation (ONGC) of India is also under consideration for the current financial year. The government has already mopped up Rs 1,062 crore by divesting stake in Satluj Jal Vidyut Nigam, and Rs 960 crore through an FPO in Engineers India Ltd.

During the last fiscal, it had raised Rs 23,553 crore through stake sales in Oil India, NMDC, REC and NTPC. The department of disinvestment is in talks with concerned ministries for finalising the quantum of divestment in PSUs like MMTC, Rashtriya Ispat Nigam Limited and Power Finance Corporation, among others.

The finance minister is bullish on the economy. " In the short term, it is reasonable to expect that the economy will go back to the robust growth path of around nine per cent that it was on before the global crisis slowed it down in 2008," he said.

FM pointed out that to begin with, there has been a revival in investment and private consumption demand, though the recovery is yet to attain the pre- 2008 momentum. Second, Indian exports have recorded impressive growth since November and December, 2009. " The favourable capital market conditions with improvement in capital flows and business sentiments are also encouraging," he added.

Finally, the manufacturing sector has been showing buoyancy reminiscent of the pre- slowdown years. There is also a substantial pick- up in corporate earnings and profit margins, the finance minister said.

Courtesy: Mail Today