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India’s Disinvestment Receipts
Context:
The central government’s disinvestment receipts for the financial year 2024-25 (FY25) are on track to be the lowest since 2014-15.
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- So far, the government has accrued approximately ₹9,319.05 crore through minority stake sales in the current fiscal year.
- In comparison, disinvestment receipts in FY24 amounted to ₹16,507.29 crore.
- With less than two weeks remaining in the fiscal year, the receipts for FY25 are set to fall below even the ₹13,534.4 crore collected in 2021-22.
Shift in Strategy: From Targets to Value Creation
- Since FY24, the government has stopped setting specific disinvestment targets.
- Following the full Budget presentation for FY25 in July, then-Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey underscored the government’s evolving approach.
- The focus has shifted from aggressive stake sales to “value creation” by optimising the performance of public sector enterprises (PSEs).
- This strategy includes measures such as increasing capital expenditure, ensuring higher dividend payouts, calibrated market dilution, and, where feasible, privatisation.
The government primarily undertakes disinvestment through two key methods:
- Minority stake sales, where a portion of government-owned shares is sold in the open market.
- Strategic disinvestment, which involves the sale of a controlling stake in central public sector enterprises (CPSEs), including the transfer of management control.
Key Disinvestment Transactions in FY25
In FY25, the government has carried out the following disinvestment transactions:
- General Insurance Corporation of India (GIC Re): Sold a 3.39% stake via an Offer for Sale (OFS), raising ₹2,345.55 crore.
- Cochin Shipyard: Divested 4.95% of its stake through OFS, generating ₹2,015.32 crore.
- Hindustan Zinc: Offloaded 1.62% of shares via OFS, securing ₹3,449.18 crore.
- Specified Undertaking of the Unit Trust of India (SUUTI): Included remittances amounting to ₹1,509 crore in the government’s disinvestment receipts for FY25.
- Others: Additionally, the government has agreed to sell 100% of Ferro Scrap Nigam, a wholly owned subsidiary of MSTC, to Konoike Transport Co. for an equity value of ₹320 crore. However, the transaction has not been completed yet.
Looking Ahead
- The subdued disinvestment receipts highlight the government’s cautious approach, prioritising the long-term sustainability of PSEs over short-term revenue generation.
- As the fiscal year draws to a close, it remains to be seen whether any further transactions will be executed before March 31.q
