The government, which will almost certainly fall far short of its 2013-14 disinvestment target of Rs. 40,000 crore, has a plan to at least reduce the shortfall — make cash-rich PSUs pay for their own shares.
Power producer NHPC Ltd will contribute Rs. 2,200 crore to the government’s kitty via the buyback route.
“NHPC is sitting on huge cash reserves of close to Rs. 6,000 crore and will buy back 10% of its total shares from shareholders... the government, with an 86% stake in the company, will be the main beneficiary of this exercise,” said a senior company executive.
The buy-back price has been fixed at Rs. 19.25 per share. It had offered shares at Rs. 36 in its 2009 IPO. So, many shareholders may not tender their shares at the lower buyback price, allowing the government to rake in almost the entire Rs. 2,200 crore.
“The buy-back will be completed by December after which the government may raise another Rs. 2,400 crore by disinvesting 10% in the firm via an offer for sale, which it had deferred in August this year,” the executive said.
There is a cooling off period of 12 weeks that is needed after the buy-back programme.
“As merchant bankers for stake sale in NHPC through OFS were already selected before the announcement of the deferment came, the process of disinvestment can be completed before March 31, 2014,” he added.
However, when asked, a senior department of disinvestment official refused to comment and said: “We continue to look at all options of raising funds.”
In the past, the government has often leaned on government-owned financial institutions to push through disinvestment in public sector companies. Life Insurance Corporation, for example, had bought 35% and 46%, respectively, in the offers for sale of Nalco and Rashtriya Chemicals & Fertilizers shares last year.
Last year, LIC alone had contributed about 10% to the government’s total receipts of Rs. 23,900 crore from disinvestments.
Fearing a substantial shortfall in its disinvestment targets set for Rs. 40,000 crore for this fiscal, the government — that has just Rs. 1,400 crore of proceeds in the exchequer’s kitty so far — is exploring all possibilities to garner maximum funds in the remaining four months of the financial year.