The government has planned a big push for its disinvestment programme. After the strategic stake sale plan got the in-principle go-ahead for five CPSEs from the highest level, CNBC-TV18 is now given to understand that asset monetisation is under serious consideration by the government. The residual stake sale in Hindustan Zinc may also be examined afresh. Not just this, the government may also consider calling for Expressions of Interest (EoI) for Air India disinvestment, by mid-October.
Sources have told CNBC-TV18 that a committee under the Cabinet Secretary, comprising of representation from the finance ministry and other administrative ministries, has already been set up to jump-start the process of asset monetisation. The government is primarily focussed on monetising core assets in infra space like gas pipelines, transmission lines, telecom towers among other assets. Sources also indicate the government may like to target up to Rs 50,000 crore via monetisation of core assets in the current fiscal if the process moves quickly enough.
However, legal hurdles persist. HZL exercised the second call option on July 21, 2009. The government disputed the validity of the call option and refused to act upon the second call option. Consequently, the company invoked arbitration which is in the early stages. The next date of hearing is to be notified. The government without prejudice to the position on the Put/Call option issue has received approval from the Cabinet for divestment and the
Sources have also told CNBC-TV18 that the government is keen for an early resolution to the Hindustan Zinc case which is stuck in Supreme Court. The government holds slightly over 29 percent in HZL and according to government sources, this may be valued at around Rs 30,000-35,000 crore. The government is open to selling this residual stake if there is a favourable judgement from the Supreme Court, and possibly, informal discussions between the finance and the mines ministry are underway to explore the possibility of how best to address the legal complexities involved in this case.
government is looking to divest through the auction route. Meanwhile, the Supreme Court has, in January 2016, directed status quo pertaining to disinvestment of government’s residual shareholding in a public interest petition filed which is currently pending and sub-judice.
Government sources have also clarified that the offer for sale (OFS) route would be the best mechanism to sell this residual equity and the stake sale will have to be in tranches.
It is further learnt that the process of inviting EoIs for Air India strategic disinvestment should culminate sometime mid-October, after the Air India Specific Alternative Mechanism (AISAM) nod. Among other issues, the EoI will clarify the eligibility criteria for bidders and how much debt the government is able to hive off from Air India’s balance sheet.
CNBC-TV18 has already reported that the government is also working on paring its stake in select CPSEs to below 51 percent but retaining government control through cross-holdings of CPSEs or government-owned financial institutions like banks and insurance companies. Going below 51 percent will help government reset it’s ETF baskets, CPSEs as well as Bharat 22, which comprise of common stocks. In some of these stocks, the government shareholding is already touching 52-56 percent, making further stake sales difficult. An inter-ministerial discussion is underway on this subject and it may come for a Cabinet nod soon.
In the meanwhile, the government is coming out with the next FFO of Bharat 22 on October 3 and 4 with a base size of Rs 2,000 crore and possibly a greenshoe option depending on the subscriptions.The government is also all set to take a consolidated nod from the Cabinet on selling its entire equity in BPCL, CONCOR, SCI, THDC and NEEPCO. While the government works on the cabinet approvals, it may also simultaneously start the process of appointing transaction advisors for each strategic stake sale. It’s noteworthy, that the disinvestment target has been set for Rs 1.05 lakh crore in FY20 while so far less than Rs 13,000 crore has been garnered.