Finance minister Arun Jaitley on Tuesday said the recent fall in share prices of the three state-owned public sector units — Coal India, ONGC and NHPC — ahead of the government’s stake sale in these companies should not be seen as waning investor enthusiasm towards these stocks.
“As a general phenomenon, other things remaining the same, when the supply of any stock in the market increases, there is a run-down on the stock price. Disinvestment increases the quantity of CPSE stocks in the market. Therefore, the recent fall in share prices of Coal India, ONGC and NHPC is nothing unusual and does not show any diminished appetite for these stocks,” Jaitley said.
India kicked off its ambitious disinvestment plans last week, with investors bidding for twice the number of shares on sale to divest the government’s 5% stake in Steel Authority of India Ltd, yielding `1,715 crore for the exchequer.
The Centre plans to sell 5% stake in ONGC, India’s biggest energy explorer, 10% in CIL, the world’s biggest coal miner, and 11.36% in power producer NHPC, by the end of January.
Labour unions are strongly opposed to the CIL stake sale, which could upset these plans, while ONGC wants the subsidy-sharing formula to be fixed before divesting government equity.
The success of this fundraising programme is crucial to contain the fiscal deficit —a measure of how much the government borrows to fund its expenses — within the budgeted 4.1% of GDP in 2014-15.