New Delhi: Privatisation of central public sector enterprises has not been put on hold, but is not a priority under the government’s calibrated approach to disinvestment, said Tuhin Kanta Pandey, secretary of the department of investment and public asset management (DIPAM).
He said that the focus will be on ‘value creation’ from disinvestment, dividends and returns for shareholders.
“I would not say that it is on hold but it is not, as such, a priority. The outright focus now is on value creation,” Pandey told Mint in an exclusive post-budget interaction in response to a question on whether the government had put asset sales on hold while taking the approach of not setting disinvestment targets.
In order to ensure value creation, PSUs performance systems would have to be aligned with interests of shareholders, which in turn will help the government earn dividends, and instead of a time-bound asset monetisation or disinvestment, a calibrated approach will be adopted.
“Our point is that we should align the interests of minority shareholders into our thinking which is key to value creation. This means looking at company fundamentals, their performances, growth including capex, and consistent dividend policy which optimises dividend extraction rather than maximising it, so that it can be invested back into the company’s growth,” he said, noting that the performance indicators for PSUs had been recalibrated two years ago which were now showing results.
Disinvestment Strategy
The government has moved away from setting annual targets for disinvestment in the Union Budget from this year. In the FY25 budget, the government has kept proceeds from disinvestment and asset monetisation at ₹50,000 crore but under the ‘miscellaneous capital receipts’ category. This is shift from earlier budgets where disinvestment targets were clearly defined.
The government expects to identify the winning bidder in IDBI Bank stake sale process within this financial year, even though the final sale may take a little longer, he said.
“We’re aiming that the selection of the winning bidder should happen this financial year, but there can be some processes that happen even after that, which can take a little time,” he said. He also added that the Reserve Bank of India (RBI) was yet to give a final report on the ‘fit and proper’ scrutiny of the interested bidders. The process of due diligence will begin only after the RBI report, and will include opening of the virtual data room. Financial bids will be invited after that.
The government and Life Insurance Corporation of India are jointly selling nearly 61% stake in IDBI Bank, the process for which was started in 2022.
Despite being the single largest shareholder in private entity Vodafone Idea, the government is unlikely to sell its stake in the beleaguered telecom services provider anytime soon, and will consider it at an opportune time, he said.
“The government is not in the business of investing in private companies, it was a relief package (through which government bought shares in Vodafone Idea). But we’re not going to wind up in a day, (selling) it is part of the calibrated approach and our value creation strategy is irrespective of the entity,” he said, noting that the directions to PSUs to beef up performance would hold true for the telco as well, even though they have not been explicitly stated by the government.
The government holds a 23.15% stake in debt-laden Vodafone Idea. The stake was acquired when the telecom firm converted dues that it owed to the government into equity. Pandey said that the carrier was performing better after it raised equity from promoters as well as ₹18,000 crore through an FPO and was now raising debt from banks.
Stake sales
Pandey cited Sebi rules while declining to respond to a question on whether the government intends to further pare stake in LIC of India, that was listed in 2021. “The float has to be improved but a number of factors will have to be considered before we proceed with it,” he said, in response to question on the thinking behind undertaking follow-on public offers of listed central public sector units.
The top official also stated that the strategic disinvestment of Container Corporation of India was unlikely to take off this year. Stake sale of state-run Bharat Petroleum Corp Ltd and Pawan Hans that has been scrapped will not be taken up again. He said that stake sale in BEML, Shipping Corporation of India, HLL Lifecare Ltd, and Project & Development India Ltd were ongoing.