Union Budget 2026: Disinvestment seen as a key to fund capex push; execution risks persist

Ahead of the union budget 2026-27, market participants will have a sharp focus on expectations around disinvestment and asset monetisation to boost non-tax, non-debt revenues and fund higher capital expenditure. Market participants are expecting strategic sale of IDBI Bank Ltd, Shipping Corporation of India Ltd and OFS select PSU companies in FY27.

While FY26 receipts may fall short of targets due to execution delays, divestment goals for FY27 could be raised significantly. Stake sales in PSU banks and large strategic transactions remain key, though timelines may slip, said the analysts.

While the necessary procedural and evaluation processes are underway, if this is not finished in FY26 would imply slippage in the non-debt capital receipts, said BofA Securities. "We also expect for FY27 divestment targets to be raised, doubling from Rs 40,000 crore to Rs 80,000 crore, largely reflecting greater reliance on non-tax and non-debt capital receipts," it adds.

Disinvestment and asset monetization are expected to play a critical role in non-tax revenue generation. The government may target Rs 50,000–70,000 crore through strategic disinvestment, stake sales, and asset monetization initiatives. While execution has historically lagged targets, a clearer and time-bound roadmap would be positively viewed by markets, said Axis Securities.

"FY26 disinvestment receipt is expected to be lower than the budget estimates. The government is actively considering additional stake sales in PSU Banks such as Central Bank of India, UCO Bank, Punjab and Sind Bank, while a decision on major strategic transactions like the IDBI Bank is awaited," it added.

"We estimate FM shall target higher disinvestment receipts to the tune of Rs 1 lakh crore (through stake sale in IDBI Bank and other measures) in order to create space for bigger capex push. With stake sales of a couple of entities on the radar along with scope to reduce stake in PSU financial entities, we believe the budget may focus on disinvestments," said Nuvama Institutional Equities.

We assume healthy dividends from the RBI, but the government will most likely budget it lower than the blockbuster levels of Rs 2.7 lakh crore in FY26. We are building largely flat disinvestment proceeds in FY27, said Nomura. It is expecting an announcement of a rolling 3-year disinvestment / privatisation pipeline for public sector enterprises.

Disinvestment as on January 15, 2026 was slightly higher than the year-ago level. These include sales of the government's stake in the Mazagon Dock Shipbuilders, Bank of Maharashtra and Indian Overseas Bank, through the offer for sale (OFS) route, as well as remittances from the Specified Undertaking of the Unit Trust of India, said ICRA in its report.

"The disinvestment process for major CPSEs such as IDBI Bank and Shipping Corporation, which was earlier expected to be finalised in FY2026, has witnessed some setbacks. It would not be surprising if the IDBI sale gets pushed into the next fiscal," it added.

Divestment revenue in FY26YTD stands at Rs8,770 crore, far short of the target of Rs 47,000 crore, said Nirmal Bang Institutional Equities. "However, of late asset monetisation proceeds are being clubbed with divestment proceeds resulting in total collections of Rs 23,070 crore in FY26YTD," it added.