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Look at disinvestment from a larger perspective, not just investors’ point of view: Mohammad Khan

The former divestment secretary says disinvestment should have been done at a much more well-organised pace. We turned from a planned economy to a market-driven economy in the 1990s and even after 30 years, the government is still doing business, he adds.

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Last Updated: Feb 20, 2020, 01.14 PM IST
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M_Id_280272_Mohammad_Haleem_Khan
If you want to reach the so-called market-driven economy target which you have been planning for almost 1990 onwards, that is 30 years, then you have to push for this disinvestment.
It is to monetise PSUs given that only a few PSU companies have managed to create general shareholder wealth and others have destroyed it. What is your take?

I do not know how to respond to this because the disinvestment has to be looked at from a larger perspective and not the perspective of the investor alone. Whether we have been doing enough to create investor interest in the PSU is also an important factor. A gentleman from Aditya Birla Group said if you have a good dividend yield and even then the market is not responding to PSU scrips, then it will be important to examine the individual cases on merits. Otherwise, by sheer logic of the market, if you are getting a good dividend yield, I do not know why the investor should not be interested in getting that. At some point, because of taxation on dividends, and these companies are giving good dividends, this might have a headwind. But, apparently, as an investor, if you are looking for yield on your investment, then PSUs cannot be found at fault. They are comparable to any good scrip in the market.

You have to see the supply side of the scrips also. Since the government has gone aggressively for disinvestment and more and more scrips are going to be offloaded in the market, naturally, there will be a very big supply in the market. Then the speculative element also does not take risk and in that situation even if the dividend yield is very good, the general market will not be very positive about the stock.

If you want to reach the so-called market-driven economy target which you have been planning for almost 1990 onwards, that is 30 years, then you have to push for this disinvestment.

What to your mind is the best possible solution for a PSU revival? Is disinvestment the only solution?

For some reason or the other, disinvestment has been visualised as a source of mobilising resources. Disinvestment should have been done at a much more well-organised pace. We turned from a planned economy to the market-driven economy in the 1990s. Already 30 years have gone and still, the government is doing business. It is because of the historical reasons that there is some sort of a bunching of disinvestment taking place. The market sentiment may or may not be as comfortable as you would like to have it ideally, then there will be pressure. And the pressure will be only on those scrips which are going to get more supply; the companies where the investor knows that there is not going to be further supply, they are going to sustain that valuation. You might have noticed, even the best of the steel companies were available below their book value, so the market has to have its own logic. I really do not know whether one should decide public policies on the basis of market perception.

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