At current market capitalisation levels, the Centre has scope to raise as much as ₹11.5 lakh crore from disinvestment of public sector enterprises in the years to come while retaining a majority stake in these firms, Care Edge Ratings said in a research report on Thursday.
However, the rating agency doesn’t expect the government to be inclined to push hard on the disinvestment front this year as there is no urgency to do so, given the comfortable fiscal situation with strong non-tax receipts through dividends from RBI and public sector firms, as well as spectrum auctions.
“We believe the government will stick to the 2024-25 [Interim Budget] target of miscellaneous capital receipts, which includes divestment, of ₹500 billion,” it said, adding that the Shipping Corporation of India’s divestment “looks likely” this year, with Pawan Hans and CONCOR as other potential candidates for an outright sale.
The Central government has missed its Budget targets for disinvestment for the last five years, the report noted, attributing this to the impact of financial market volatility, litigations by labour unions, procedural delays and pricing issues. These issues could continue to slow the divestment process despite favourable market conditions, it said.
“Of late, the government has been relying on the Offer for Sale route for divestment. However, they are unlikely to generate substantial proceeds unless big-ticket divestments are undertaken,” the report said.
CARE Edge economists calculated the divestment potential at current market capitalisation, by analysing the financial data of 59 major listed central public sector enterprises (CPSEs) and 15 public sector banks and insurance firms where the government holds more than a 51% stake. Their estimate of ₹11.5 lakh crore divestment potential is a little more than twice the total divestment of ₹5.2 lakh crore conducted since 2014.
“Of this, CPSEs could contribute around ₹5 lakh crore, while PSBs and insurance firms could potentially add another ₹6.5 lakh crore. This represents the maximum amount that could be raised at current market prices without the government losing governance control of these entities,” the report said.
Indian Railway Finance Corporation Ltd., Hindustan Aeronautics Ltd., Coal India Ltd., and Oil and Natural Gas Corporation are the top firms in terms of divestment potential mathematically
