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Betting On Divestment

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The government's ambitious Rs 30,000-crore disinvestment programme got a boost on 23 November as the 5.6 per cent stake sale in Hindustan Copper was a resounding success. The Rs 810 crore raised by the government kickstarted the disinvestment process, crucial for reining in a ballooning fiscal deficit target. However, state-run Life Insurance Corp of India and State Bank of India were among the bigger buyers of shares, indicating muted interest from private sector investors.
 
Encouraged by the success of Hindustan Copper disinvestment, finance minister P Chidambaram appeared confident that the government would be able to meet the Budget target of raising Rs 30,000 crore from stake sale in public sector undertaking during the current fiscal.
 
"I am happy that issue has been fully subscribed. This is the resumption of the disinvestment process and we will go forward with the disinvestment processes as approved by the CCEA between now and March," Chidambaram told reporters in New Delhi.
 
"...I hope that we can collect the targeted Rs 30,000 crore," he added.
 
The bids received were for more than 51.6 million shares or 5.6 per cent shareholding, that were put on offer in the first tranche. The shares were offered at Rs 155 apiece, a 41 per cent discount to 22 November's closing price of HCL on the BSE.

The government offered 37.01 million shares, or 4 per cent of the company, but had the option to sell a further 51.71 million. The government is likely to exercise the overallotment option and allocate all shares for which it received bids, two sources with direct knowledge of the matter said.
 
HCL shares closed at Rs 213.05, down 20 per cent from its last close on BSE.
 
Actual bids may be even higher as stock exchanges are yet to complete the compilation of data of all the bids that were received since the opening of the process at 0915 hours this morning. It closed at 1430 hrs.
 
HCL had kept 25 per cent of the issue reserved for mutual funds and insurance companies.
 
"No single bidder other than mutual funds and insurance companies shall be allocated more than 25 per cent of the size of the sale," the company added.
 
The share sale took place on a separate window of the stock exchanges -- BSE and NSE.
 
The government is banking heavily on disinvestment programme to rein in its fiscal deficit. It had revised the target to 5.3 per cent of the GDP. Global rating agencies have threatened to downgrade India's sovereign credit rating to junk if it fails to rein in its deficit, which is ballooning because of higher spending on food, fuel and fertiliser subsidies and poor tax receipts.
 
Just last month, Finance Minister P. Chidambaram raised the fiscal deficit target to 5.3 per cent of GDP for the current financial year to end-March 2013 from a previous target of 5.1 per cent.
 
In fact, pushing forward its disinvestment agenda, the government on 22 November approved sale of its 9.5 per cent stake in the country's largest power producer NTPC that could fetch as much as Rs 13,000 crore.
 
The government has decided to disinvest minority stake in Rashtriya Ispat Nigam Ltd, Hindustan Aeronautics Ltd, Bharat Heavy Electricals Ltd and Steel Authority of India Ltd.
 
Besides, stake sale in Hindustan Copper Ltd, MMTC Ltd, National Aluminium Company Ltd Oil India Ltd, NTPC Ltd and NMDC Ltd would also take place by December 20.
 
The government managed to raise Rs 14,000 crore through share sales in the previous fiscal year, less than half its Rs 40,000 crore target.
 
Earlier this month, the government pushed back a decision to sell a stake in state-run National Aluminium Co, in a deal that could have raised about $270 million. Last month, state steelmaker Rashtriya Ispat Nigam Ltd shelved an IPO due to disagreement with bankers over pricing, sources with direct knowledge of the matter said.