The government had set a divestment target of Rs 65,000 crore for fiscal year 2022-23. However, it failed to meet the target and was able to raise only Rs 31,106.4 crore. All eyes are now on the Union budget for 2023 to know the government’s divestment plans for the next fiscal year and how it will leverage its interests in public companies.
According to the Department of Investment and Public Asset Management (DIPAM), the government has sold 3.5% of its stake in Life Insurance Corporation (LIC) through an initial public offering (IPO) and raised Rs 20,516.12 crore. This made up a large portion of the total amount the government received from the divestment in FY23.
Rs 3,026.23 crore was raised through a tender offer in Oil and Natural Gas Corporation (ONGC), while the government let go of its 19.55% shares in Paradeep Phosphates Ltd (PPL) to get Rs 471.5 crore. In addition, a sale of Axis Banks shares held by the specified company of the Unit Trust of India (SUUTI) helped the government to raise Rs 3,839 crore.
However, despite some major divestments, most notably LIC’s largest IPO in the country, the divestment target could not be met. Because of this, experts believe the government could set a more realistic target for the next fiscal year in the upcoming budget.
According to Garima Kapoor, economist-institutional equities, Elara Capital, the divestment target is likely to be between Rs 40,000 and Rs 50,000 crore. “Due to market conditions, the intended sale of Bharat Petroleum Corporation (BPCL) could not proceed, but the realization of the LIC divestment was lower than expected and the proceeds from the IDBI Bank sale are unlikely to materialize in FY23,” said she. as said by TUSEN India.
According to global brokerage firm and financial services company Nomura, the target is expected to be more conservative at Rs 500 billion. Kotak Institutional Equities also said in a recent note that divestments for FY 2023-24 will remain around Rs 500 billion.
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