PSU stocks with limited scope for privatisation such as ONGC, NTPC, Power Grid, Indian Oil Corporation, and Coal India, may continue to face selling pressures.
“The government has earned $12 billion via PSU stock sales through ETFs in the last three years and fear of more such sales will put supply pressure in the market on non-disinvestment candidates,” said CLSA.
However, the chances of the government concluding the BPCL privatisation before the end of the current financial year is challenging, the brokerage said.
“The experience of three previous successful cases back in 2001-2002 shows that privatisation is a time-consuming process and takes 6-16 months between global tender and deal consummation, thus, concluding the BPCL privatisation before Mar’20 is challenging,” said CLSA.
CLSA said weak tax collection growth and stimulatory measures by the government have created a fiscal shortfall of over ₹2 lakh crore in the current financial year. The government has set a fiscal deficit target of 3.3% of the GDP for the current financial year.
The brokerage believes that the disinvestment target may only grow going forward especially if more tax cuts happen and as other potential non-tax revenue sources are already constrained.
“Even assuming a 50-70 bps (basis points) relaxation, the current year’s record $15bn (billion) disinvestment target may only grow, especially if more tax cuts happen,” said CLSA.
The brokerage said the government’s total holding in listed PSUs is $174 billion of which financials account for $61 billion and those are unlikely to be disinvested in the near future.
Sale of SUUTI holdings is an easier option, but the government only has about $4.8 billion in the two stocks – Axis Bank and ITC – which can be easily sold, said CLSA.
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16 Comments on this Story
Vaity327 days ago
Welcome news. These are PSUs with exceptional talent and great capability. Reducing government stake below 50% at the earliest would give these organizations the much-needed impetus to unleash their full potential and transform into world-class organisations. The leadership of these organizations should engage/communicate with all stakeholders, particularly the employees, to address all their apprehensions to facilitate smooth transition.
Ap Upadhyay327 days ago
Except Air India, Modi Government is just reducing it''s holding. As per the budget speech, the FMCG foreign companies should also dilute it''s holding to 51% and ensure that the public individual absorbed this sale without dragging down the stock prices.
Natarajan D327 days ago
Stage will come to sell Parliament House, president house. Good policy by BJP government