Govt eyes Rs 8,000 cr from stake sale in 4 PSUs

Dipam is conducting the selection of merchant bankers and legal advisors, and planning roadshows.

To meet its ambitious stake sale target this year, the government is planning initial public offerings (IPOs) of equity in four state-owned companies in 2016-17, to mop up around Rs 8,000 crore (Rs 80 billion).

The department of investment and public asset management (Dipam) has identified Housing and Urban Development Corporation (Hudco), Hindustan Aeronautics (HAL), and Rashtriya Ispat Nigam (RINL) as the companies it wants to take public after the IPO of Cochin Shipyard, preparation for which is well under way.

The Centre plans to sell 10 per cent stake in Cochin Shipyard through an IPO and will also issue fresh shares.

Dipam is conducting the selection of merchant bankers and legal advisors, and planning roadshows. According to sources, discussions have begun on these companies.

However, planning is one thing and implementation will be another challenge.

Plans for IPOs in HAL and RINL were discussed as early as 2014-15 and have not yet materialised. 

The IPO of HAL, a defence behemoth and India's only manufacturer of military aircraft so far, had been put on the back burner as the defence ministry was not keen on selling stake in one of its marquee organisations.

As for RINL, the Vizag-based steelmaker suffered damages worth Rs 350 crore (Rs 3.5 billion) as Cyclone Hudhud hit the country's east coast in October 2014.

It was then said the IPO plans would be revived once the company had recovered. HAL and RINL were discussed in FY16 as well but nothing materialised.

Another company, THDC, had been part of the Centre's IPO plans in the past two financial years.

It, however, has not been discussed so far this year, sources say. It was jointly promoted by the Centre and the Uttar Pradesh government and there is reportedly reluctance from the latter for a public issue.

While officials have not put any timeline on the prospective IPOs, they say talks are being held with the urban development, steel and defence ministries in the case of Hudco, RINL and HAL, respectively.

For 2016-17, the budgeted disinvestment target is Rs 56,500 crore (Rs 565 billion), of which Rs 36,000 crore (Rs 360 billion) is expected through minority stake sales, including IPOs.

The rest is expected from strategic sales, including loss-making companies and asset sales.

Recently, Dipam had issued requests for proposals for merchant bankers to assist in stake sales in State Trading Corporation (STC), MMTC, NMDC, Oil India, National Fertilizers, and Rashtriya Chemicals and Fertilizers (RCF), through the offer-for-sale route.

The Centre plans to sell 15 per cent each in STC, MMTC and National Fertilizers, 10 per cent each in NMDC and Oil India, and five per cent in RCF.

The government could earn about Rs 6,500 crore (Rs 65 billion) from these divestments.