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BW Businessworld

India Eyes $2.6 Bn From Divestment

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The Cabinet approved stake sales in four state companies on 14 September, restarting a stalled divestment programme as part of a broader push to revive a reform agenda aimed at kick-starting economic growth and shoring up public finances.

The government also approved 10 per cent disinvestment through initial public offering in RITES.

The cabinet approved the sale of 9.5 per cent in Hindustan Copper Ltd,  12.15 per cent in National Aluminium Co Ltd, 9.33 per cent in trading firm MMTC Ltd and 10 per cent in explorer Oil India Ltd, minister of trade and industry Anand Sharma told reporters.

At current market prices, the stake sales would raise about $2.6 billion for the government.

New Delhi aims to raise Rs 30,000 crore through share sales in state-run companies in the current fiscal year that ends next March, but has thus far drawn a blank as weak market conditions have deterred public issues or auctions.

The government has already approved a share sale in Steel Authority of India Ltd and an initial public offering in steelmaker Rashtriya Ispat Nigam Ltd, which together were expected to fetch close to $1 billion, but the offers have not yet materialised.

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Market sentiment has picked up over the past couple of months, however. BSE Sensex has rallied more than 19 per cent so far in 2012, compared with a 12.6 per cent gain in the MSCI Asia-Pacific index excluding Japan, with most of the gains since June.

"We are seeing a pronounced rally and this is quite nicely programmed," said Saurabh Mukherjea, head of equities at Ambit Capital. "My sense is we would see the divestments go through, but they should hope to get through as much as they can between now and Christmas."

Indian companies raised $7.1 billion from share offerings in the first half of this year, down 4 percent from the same period in 2011, according to Thomson Reuters data.

(Reuters)