The divestment of state-owned firms lined up in 2003-04 is likely to yield a minimum of Rs 8,000 crore (Rs 80 billion), according to the Mumbai-based Center for Monitoring Indian Economy.

The government has already lined up the privatisation of National Aluminium, Hindustan Petroleum, Bharat Petroleum and Maruti Udyog.

The privatisation of National Aluminium and Hindustan Petroleum would be followed by open offers, entailing an additional Rs 3,000 crore (Rs 30 billion).

"Assuming that all (divestments) are successfully concluded and a minimum of Rs 11,000 crore (Rs 110 billion) is generated, and the divestments and associated open offers account for between one-fifth and one-sixth of the total M&A value, 2003-04 should record merger and acquisition (M&A) deals worth Rs 50,000-70,000 crore (Rs 500-700 billion)," according to a CMIE report.

However, the current economic uncertainty owing to the prolonged economic slowdown and the Iraq war could lead to a major drop in the values of M&A deals.

There is likely to be an increased focus on consolidation and restructuring of existing businesses rather than on achieving inorganic growth.

The uncertain global scenario and rising oil prices may even lead the government to postpone the divestment of its two navratnas engaged in refining petroleum products, Hindustan Petroleum and Bharat Petroleum, the report adds.

Divestments by the central government accounted for a major proportion of the total M&A deals in 2001-02 and 2002-03.

Selloffs amounted to Rs 3,265 crore (Rs 32.65 billion) in 2002-03, a 10 per cent appreciation over Rs 2,965 crore (Rs 29.65 billion) garnered by the government in the previous fiscal.

The associated open offers for the privatised companies amounted to Rs 1,838 crore (Rs 18.38 billion) and Rs 1,489 crore (Rs 14.89 billion) in 2001-02 and 2002-03, respectively.

M&As in the telecom industry are set to increase with the Cabinet relaxing the non-transferability clause pertaining to the telecom licences on 25 March 2003. Telecom companies will now be able to transfer individual service licences.

Earlier, the licensee company was barred from creating any third party rights and a lock-in period was prescribed in which the equity structure of the licensee company could not be changed.

According to the CMIE, the banking industry is expected to see higher M&As with the Budget 2003-04 increasing the FDI limit in banks to 74 per cent from 49 per cent.