Economy reviving, experts see enough appetite for Rs 50,000 cr PSU share sale

The NDA government’s ambitious disinvestment programme is likely to sail through without much obstructions this year and the next as reform process accelerates, say stock market experts and analysts. They expect the share sale in public sector undertakings to gain momentum in the second half this year if monsoon scenario improves and economic activity picks up.

“The current financial year is still young and the government will plan out accordingly its divestment programme. We expect things to change on ground, and if the monsoon scenario improves the divestment programme is likely to get a major impetus,” said Sonam Udasi, head of research, Tata Asset Management.

Although valuations are not very attractive in some of the companies on the divestment block, the overall upbeat broad market sentiment could augur well for the share sale process, said Udasi.

The Business Standard today reported that the Cabinet Committee on Economic Affairs (CCEA), led by Prime Minister Narendra Modi, has already granted approval for stake sale worth about Rs 50,000 crore in about 20 companies.

Some of the top companies in which the government is planning to offload its stake include ONGC, Indian Oil Corp, NTPC, NMDC, BHEL and NHPC etc.

“The market has enough appetite to subscribe to the shares of these government controlled blue-chip companies. There are several quality papers in which investors will be interested to enter into because of long-term growth potential in them,” said Kishor Ostwal, CMD, CNI Research.

“Although, I don’t expect the disinvestment target set by the government will be achieved in this financial year, there will be demand for these papers as the overall scenario is expected to favour the share sale process. There are positive signals from the Centre with regards to roll out of GST and tax-related issues concerning foreign investors, which will set the tone for the divestment programme,” said an independent market expert, who spoke on condition of anonymity.

A look at the previous six years’ disinvestment targets reveals that on an average the government has been able to meet only 64 percent of its stake sale target. The only year when it was close to meeting the target was 2009-10, when the target was Rs 25,000 crore and the government managed to raise Rs 23,553 crore, about 94 percent.

The least successful year was 2011-12, when the target was Rs 40,000 crore and the UPA government managed to raise Rs 13,894 crore, about 35 percent of the target. It managed to raise Rs 24,277 crore, just 77 percent of the targeted Rs 31,350 crore in 2014-15, that too after revising the target sharply down from initial Rs 58,425 crore (including Rs 15,000 crore from sale the government stake held in various companies through Suuti).

Data inputs from Kishor Kadam