Divestment: FY22 revenue seen at Rs 1-1.3 lakh crore, FY23 target at Rs 1.75 lakh crore

The government could raise around Rs 1-1.3 lakh crore in FY22 divestment proceeds, which largely hinges on the proposed mega IPO of Life Insurance Corporation in March.

While the IPO of LIC would help the government narrow the shortfall from the budgeted divestment target of Rs 1.75 lakh crore for FY22, it could again set a target of around Rs 1.75 lakh crore for the next fiscal year as some of the big-ticket strategic sales such as that of fuel retailer-refiner BPCL and IDBI Bank originally planned for this fiscal year are expected to wrap up next fiscal year.

Without the IPO of LIC, government divestment proceeds would be around Rs 30,000 crore in FY22.

The IPO of LIC is fast-tracked in consultation with the Securities and Exchange Board of India (Sebi) and the Draft Red Diversion Prospectus (DRHP) filed with the regulator in the first week of February would be as perfect as possible, according to the Department of Investment and Public Assets Management Secretary Tuhin Kanta Pandey told FE last week, reiterating the government’s determination to complete the country’s largest IPO in March.

The government could mop up around Rs 1 lakh crore if it dilute a 10% stake in the public sector insurer, but the extent of the problem is not yet clear as market sentiments could decide. The government has collected Rs 27,330 crore or 16% of the FY22 divestment target.

The government could extract a few thousand rupees from the privatization of helicopter service provider Pawan Hans (unlisted) and the sale of part of the stake of SUUTI (Specified Undertaking of The Unit Trust of India) in Axis Bank or ITC by March 2022. SUUTI 7.92% stake in ITC is worth around Rs 21,000 crore and 1.55% stake in Axis Bank is worth around Rs 3,700 crore at current market prices.

The privatization of BPCL, which was scheduled for FY22, will likely be completed in FY23, as no decision has yet been made on financial tenders. In November 2020, several bidders, including Vedanta, Apollo Global Management and Think Gas (I Squared Capital), expressed interest in the government’s 52.98% stake in BPCL. However, US private equity firm I Squared Capital has reportedly dropped out of the race to buy the state-owned oil company, due to the deal’s complex structure and lack of backers for the deal.

The market value of the Centre’s entire stake in BPCL is worth around Rs 44,000 crore at current prices. The government would probably want a premium to the market valuation for its stake in BPCL. It can fetch 50,000 to 60,000 crore rupees.

Other significant deferrals to the next financial year include the government’s proposed 45.48% stake in IDBI Bank, worth around Rs 24,500 crore at current market prices. By making appropriate changes to the railways land licensing policy, the government could offload a 30.8% stake in the Container Corporation worth around Rs 12,000 crore at current prices. current market. The privatization of the Shipping Corporation of India could yield around Rs 4,000 crore. With the Supreme Court recently clearing the sale of the government’s remaining 29.54% stake in Hindustan Zinc, worth around Rs 39,000 crore, this could be another big divestment in the coming year. exercise 23.

In the FY22 budget, the government announced the privatization of two public sector banks and a general insurance company. But these operations should be included in the divestment program for the next fiscal year. According to sources, Niti Aayog has already recommended the sale of Indian Overseas Bank (96.38% worth around Rs 38,000 crore at current market prices) and Central Bank of India (93.08% Rs 17,575 crore) to the Core of Secretaries on Divestment, headed by the Cabinet Secretary. In addition, a public sector general insurance company is likely to be privatized.
There will also be a few other smaller deals, although the bulk of next year’s divestment proceeds will come from strategic sales/privatizations.