Govt alters strategic divest plan, more HPCL-ONGC-like deal on cards

NEW DELHI – In a major change in stance, the disinvestment department may look at strategic stake sale of smaller public sector companies to larger ones instead of privatising large state-owned companies, two senior finance ministry officials said.

With the COVID-19 pandemic and its impact on the stock market, there has been erosion in value of shares of many public sector companies the government had planned to privatise in 2020-21 (Apr-Mar).

“Given the current market condition and the outlook for the entire year, it seems difficult to privatise some PSUs. However, the disinvestment department will have to try other avenues like the exploring the option of larger PSUs taking over smaller ones if they make strategic sense,” one of the officials told Cogencis.

Another official said the department was planning to prepare a list of entities that are possible candidates for acquisition by larger units across sectors. “It is important that the units are strategically compatible with each other in case of a takeover. But first, the task will be to shortlist such companies after taking views from administrative ministries and departments,” the second official said.

With the possibility of achieving an ambitious divestment target of 2.1 trln rupees for the current financial year already looking bleak, the government will evaluate every possible instrument to boost revenue.

Last year, the government had initiated the process to sell its entire 53.29% stake in refiner and fuel retailer Bharat Petroleum Corp, and 100% in national carrier Air India. It also plans to sell 30.80% of its 54.80% stake in Container Corp of India.

After floating the request for proposal to sell stakes in Bharat Petroleum Corp and Air India earlier this year, the government has already overshot the deadline once.
The COVID-19 pandemic has also jeopardised the proposed stake sale of Life Insurance Corp of India through an initial public offer.

In March, the government completed the strategic disinvestment of its 74.49% stake in THDC India Ltd and 100% stake in North Eastern Electric Power Corp Ltd to state-owned NTPC Ltd.

In 2018-19, state-owned Power Finance Corp Ltd completed the acquisition of the government’s 52.63% stake in REC by paying 145 bln rupees. The government, in 2017-18, completed Hindustan Petroleum Corp Ltd’s stake sale to Oil and Natural Gas Corp Ltd for 369 bln rupees. End