The government’s ambitious plan to raise Rs 41,000 crore via minority stake sales in state-owned companies got off to a strong start on Wednesday, with the 5% share sale in Rural Electrification Corp (REC) getting subscribed over five times.
For the 49.3 million shares on offer, bids were received for over 273.1 million shares, to the tune of Rs 7,621 crore, as per data from stock exchanges. There was strong response from retail as well as institutional investors, and the issue got subscribed within an hour. Retail investors got a 5% discount to the issue price.
“We are encouraged with the overwhelming response to the (sale),” divestment secretary Aradhana Johri said in a television interview.
Government asset sales are crucial if India is to meet a fiscal deficit target of 3.9% of gross domestic product for 2015-16. The government has missed its divestment target for the past five years.
Banking sources said both overseas and domestic portfolio investor demand for REC’s shares exceeded supply, reflecting confidence in Asia’s third-largest economy.
At the floor price of Rs 315 per share, the government would raise over Rs 1,550 crore from the offer for sale. The government holds 65.64% stake in the state-run power financing firm.
While 20% of the issue was reserved for retail investors, 25% of the offer would be allotted to mutual funds and insurance companies.
Last year, the government could only raise Rs 24,500 crore through stake sale in state-owned firms, against a target of Rs 43,425 crore. In the 2015-16, the government plans to raise Rs 41,000 crore via divestment.
The sale of stock in REC is the first in a string of divestments planned by the government for the financial year that began on April 1. Its completion marks a rare early start for government sale plans, even if the offer itself had been planned for months.
REC shares closed at Rs 330.05 on BSE on Wednesday, up 2.6%. (With Reuters inputs)