Disinvestment: Government inches past ₹80K crore target

The central government nudged past its target of ₹80,000 crore to raise ₹83,523.14 crore as part of its disinvestment programme for FY18-19. However, data from the department of investment and public asset management indicates that almost half the capital was raised through central public sector enterprise (CPSE) exchange traded fund (ETF).

The government offers a pool of shares of PSU companies, which are open for buyers to trade in. Across two tranches of Bharat 22 ETF and CPSE ETFs the government has raised ₹45,079.92 crore. In fact, it raised ₹17,000 crore, its single largest tranche, through a CSPE ETF in November 2018.

In its bid to raise money, the government also sold its stake in Rural Electrification Corp to Power Finance Corp for ₹14,500 crore which is 70 percent funded through equity and rest through debt.

“The government has mostly been focusing on buybacks and mergers to meet its disinvestment target… only in rare cases has it let go of its stake in the market. We don’t expect it to sell anything significant in the open market,” says an investment banker with a foreign brokerage.

According to the Controller General of Accounts, the government’s fiscal deficit for April-February 2019 stands at ₹851,499 crore as against a full year budgeted estimate of ₹634,398 crore. Its revenue receipts stand at ₹12.66 lakh crore till the end of February against a full year FY19 revised budgeted estimate of ₹17.29 lakh crore.

The government’s disinvestment target wasn’t easy as markets have been performing poorly since late 2017. But the question remains on the fair spirit of disinvestment as most PSUs have either been asked to undertake buybacks from their cash reserves or told to be merged, which laden the company with debt. “The government has been able to raise capital with CPSE ETFs and buybacks, but value creation will happen if the management and control go to the private sector. As a result, the government may get better exit multiples,” says Abhimanyu Sofat, head of research at IIFL Securities Ltd.