In a move that is likely to fetch the government Rs 13,000 crore in 2015-16, the Cabinet on Wednesday cleared stake sales in power major NTPC Ltd and oil marketer Indian Oil Corp Ltd (IOC).
While the government will divest a 5% stake in NTPC, its shareholding in IOCL will come down by 10%. At current prices, NTPC’s market capitalisation stands at more than Rs 1.11 lakh crore, while IOC is just shy of Rs 80,000 crore.
In in budget speech in February, finance minister Arun Jaitley had announced the government’s plans to raise Rs 69,500 crore in 2015-16 through the disinvestment route, out of which Rs 41,000 crore would be via share sale in state-owned companies. The government wants to realise the rest of the amount through strategic stake sales.
The government had, in January, raised Rs 22,600 crore by selling a 10% stake in Coal India Ltd through the offer for sale (OFS) route. The government plans to further divest 5% stake in the coal miner sometime this fiscal year.
In his budget, Jaitley had raised the disinvestment target for 2015-16, despite the fact that the government failed to meet even half its Rs 63,425-crore disinvestment target in 2014-15. It managed to raise only Rs 31,350 crore.
After the stake sale, the government’s stake in NTPC would come down to a little over 69% and in IOC to 58.5%.
While NTPC shares closed down 1.8% at Rs 139 on the Bombay Stock Exchange, IOC gained 1% to Rs 335.
A Mumbai based market analyst, who did not wish to be identified, said for a fair valuation, the government should target a share price of Rs 420-425 for IOC. “In the next few months, the full effect of the direct benefit transfer scheme in LPG will show and marketing margins will improve. That will fetch the government Rs 10,000-12,000 crore, so they should wait out a bit before selling,” he added.
The government has identified more than a dozen public sector units for stake sale in the current fiscal year.