Govt raises Rs. 40,000 crore via disinvestment in 2010

Having begun 2010 with a wide gap between its income and expenditure, the government diluted its stake in nine state-owned companies, including Coal India, to raise Rs. 40,000 crore that helped cut borrowings.

The amount is the most raised in a year since the government began the programme of diluting minority stake or privatising vast swathes of public sector companies in 1991-92.

The year started with the follow-on public offer (FPO) of NTPC, in which the government diluted its 5 per cent stake and mopped up Rs. 8,480 crore. This was followed by the FPO of Rural Electrification Corporation in the month of March.
The government offloaded 5 per cent of its stake in the company and raised Rs. 882 crore, while REC issued fresh equity of 15 per cent.

In the same month, the government diluted 8.38 per cent of its stake in NMDC through FPO and mopped up Rs. 9,930 crore.

The fiscal year 2010-11 started with the initial public offer of Satluj Jal Vidyut Nigam (SJVN) in the month of May.

While the revenue mop up figure of Rs. 40,000 crore is for the 12 months ending December 31, the government has targeted raising Rs. 40,000 crore through disinvestment in the financial year 2010-11 running from April-March.

In his Budget for 2010-11, Finance Minister Pranab Mukherjee projected a fiscal deficit of 5.5 per cent for the 2010-11 fiscal, down from 6.8 per cent for the previous fiscal.

In January 2010, the Centre’s overall expenditure stood at over Rs. 7.83 lakh crore, while receipts were way below at around Rs. 4.34 lakh crore, leading to a deficit of nearly Rs. 3.5 lakh crore.

The stake dilution was part of concerted efforts to raise funds to boost government finances. As planned, the government diluted 10 per cent of its stake in SJVN and mopped up Rs. 1,062 crore.

SJVN was followed by the follow-on public offer of Engineers India, where the response was even better. The FPO of Engineers India was subscribed 13.10 times and the government kitty increased by Rs. 960 crore by offloading 10 per cent in the company.

The Power Grid FPO was open between November 11 and November 12. Riding high on the good response from Coal India, the issue was subscribed 14.79 times, with the retail quota getting 3.72 times oversubscription.

The issue managed to raise Rs. 7,442 crore, with half of the amount going to the government kitty.

The MOIL India IPO, in which the government diluted 10 per cent stake and state governments of Madhya Pradesh and Maharashtra 5 per cent each, was listed on December 15. The issue also got great response from all categories of investors and was subscribed phenomenal 55.95 times.

The IPO helped raise Rs. 1,237 crore, with half the amount going to the Centre’s kitty.

The FPO of Shipping Corporation, which was opened between November 30 and December 3, also attracted all categories of investors. The issue was subscribed 4.63 times, with the retail segment getting 6.28 times subscription.

Shipping Corporation issue mopped up Rs. 1,164 crore fro the market, half of which went to the government.

For next year, the disinvestment programme prospect looks even better.
According to Disinvestment Secretary Sumit Bose, the government is likely to dilute its stake in 4 companies — Hindustan Copper, SAIL, ONGC and IOC, in the first quarter of next year.

While Hindustan Copper, SAIL and ONGC has got Cabinet nod for disinvestment, IOC proposal is likely to be given green signal by the government anytime soon.
And if these issues hit the market in the first quarter of next year, the target of Rs. 40,000 crore is expected to surpassed.

With a gap of nearly two months came the country’s largest IPO—that of Coal India. And since then the disinvestment programme has only gathered momentum.
Coal India IPO opened on October 18 and closed on October 21 and the response was overwhelming with the retail segment subscribed 2.21 times and institutional quota around 25 times.

The company, in which the government diluted 10 per cent stake, gave Rs. 15,199 crore to the exchequer. It was listed on November 4.

Three companies, Power Grid, Manganese Ore India Limited (MOIL) and Shipping Corporation, that followed Coal India IPO were also lapped up by investors.

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