divestment: Govt looking to step up disinvestment process

After the launch of IDBI Bank’s privatization process, the government plans to continue with the rest of its divestment program, selling strategic assets, putting them up for sale and making new offers. The privatization pipeline includes Container Corp. of India (Concor) and several Air India subsidiaries that are still government-owned.

“More EoIs (expressions of interest) will follow. Concor, for example, could come in November or December,” Tuhin Kanta Pandey, secretary of the Department of Investment and Public Asset Management (DIPAM), told ET in an interview.

Extra care with due diligence

“Maybe we have EoIs for some grants from Air India, like AIESL and AIASL. So possibly Alliance Air.”

When asked how confident the department was about meeting its asset sale target of ₹65,000 crore FY23, it said it would be unfair to treat divestments purely from a fiscal standpoint.

“Over time, I don’t think there’s any potential for very large divestment earnings. But there are plenty of opportunities for investment growth and jobs,” Pandey said, underlining the refocused focus.

Air India Engineering Services Ltd (AIESL), Air India Airport Service Ltd (AIASL) and Alliance Air are still state-owned, although Air India has been sold to the Tata Group.

The center also plans to list the Indian Renewable Energy Development Agency Ltd (IREDA) and Wapcos Ltd, an engineering and construction company under the ministry of jal shakti.

“The draft red herring prospectus in the case of Wapcos has already been submitted,” Pandey said, adding that the government is also monitoring the listing of IREDA and ECGC (Export Credit Guarantee Corp. of India Ltd). The demerger of Shipping Corporation of India (SCI) is at an advanced stage and the divestment will be completed after the process is completed. The government will soon invite EoIs to mining company NMDC, he added. HLL Lifecare and Projects & Development India Ltd (PDIL) are in an advanced stage of due diligence.

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The Center expects the IDBI divestment to continue into the next fiscal year as the process includes a fit and proper check and security clearance for bidders.

“If you say the stock transfer, that seems a little difficult (this fiscal year) to me because we’re going to have an expression of interest in December and then you have the right due diligence of financial bidding,” Pandey said. “We would like it to be over before March. But then there would be regulatory issues to be resolved and closed.”

The department takes extra care with the disclosures and also monitors potential investors through the transaction advisor, after being forced to abort the privatization of Central Electronics Ltd (CEL) due to issues with the successful bidder.

“We will take as many steps as possible on disclosures and monitor them through our transaction advisor,” Pandey said. “Here’s another extra check on behalf of RBI.”

From the divestment target of 65,000 crore for the current fiscal year, the government has raised ₹24,544 crore so far.

The center is counting on the sale of its remaining stake in Hindustan Zinc (HZL), which is worth close to ₹36,000 crore at current prices, to meet the target. Pandey said the government has not yet made a decision on whether the sale will be in installments and how much stake will be unloaded through these tranches.

The Center deviates from a topline approach of capturing a number and then working for it. It is now looking at maximizing the company’s valuation and efficiency rather than just receiving a sum of money, Pandey said.

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The government has received divestment receipts of about Rs 4 lakh crore since 2014 to date. In the future, bandwidth will decrease, he added.

Citing the example of Neelachal Ispat Nigam Ltd (NINL), Pandey said that while the center got nothing from the divestment, the company received a capital injection, its financial debt was paid and jobs were saved. The divestment helped unlock the company’s potential, which would otherwise have ended up in the National Company Law Tribunal (NCLT), the bankruptcy court.

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