Search
+

    India plans to raise $2.7 billion selling stakes in two firms

    Synopsis

    Govt mulls raising Rs 20,000 cr by Coal India, IDBI Bank sell-off to fund a stimulus program to boost economy.

    PTI
    Coronavirus

    COVID-19 CASES

    Confirmed
    1,908,254
    Deaths
    39,795
    By Siddhartha Singh

    India is considering a plan to raise as much as Rs 20,000 crores ($2.7 billion) by selling stake in the world’s largest coal producer, and a bank to fund a stimulus program aimed at boosting the virus-battered economy, officials with knowledge of the matter said.

    The proposal involves a share sale depending on the market sentiment, said the officials, who asked not to be identified, as the discussions are private. In case of Coal India, if valuations are not attractive, the company will buy back shares from the government, they said. Two calls made to the finance ministry spokesman remained unanswered.

    The coronavirus pandemic has derailed Prime Minister Narendra Modi’s budget goals. Rapid spread of the disease prompted the government to boost spending on welfare programs and revive the economy struggling from the month long stay-at-home order to check the spread of Covid-19. Modi in February had planned to raise as much as Rs 2.1 lakh crore selling state assets in a bid to keep the budget deficit at 3.5% of gross domestic product.

    Despite the economic cost, the spread of infection continues unabated with India surpassing Russia to become the third worst-hit country with more than 740,000 Covid-19 cases, putting further pressure on finances.

    gfxBloomberg

    An unprecedented freeze in international travel and lower oil prices has upset government plans to sell flag carrier Air India and nation’s second-largest state refiner Bharat Petroleum Corp. Ltd. India’s asset sale goal for the year ending March 31 was more than double the previous year’s target.

    Life Insurance Corp. of India bought 51% of IDBI Bank last year, leaving the government with about 47%. The government holds more than 66% in Coal India. It had previously sold a 10% stake in January 2015, mopping up 225.5 billion rupees.

    Economists in a Bloomberg survey expect the nation’s fiscal deficit this year to hit 7% of GDP -- a level last seen in 1994. The International Monetary Fund sees the country’s public debt rising to 85.7% of GDP next year from around 70% now.

    A possible credit rating downgrade is another risk for India, which is heading for its first economic contraction in more than four decades this year. The credit score of Asia’s third-largest economy is only a step away from junk at Fitch Ratings and Moody’s Investors Service, both of which have kept the sovereign on negative watch citing deteriorating fiscal strength.
    (Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

    27 Comments on this Story

    Janardhanan Kannan23 days ago
    Selling Public Sector undertaking shares and raising funds is not the end solution to economic growth and development......Its FREE MONEY to Modi Govt in the name of pandemic...omly PLAN to make India's surface PLAIN......to play around!!!!!...Economy and Economics is not all that the present Govt thinks about in mind...It is to be known and learned from top notch Economists to put in practice.... whom the Govt. Ignores..JK
    samynarayana25 days ago
    LIMIT FUEL IMPORTS THAT RUNS TO MORE THAN 10 LAKH CRORES. MAKe IT ABSURDLY EXPENSIVE FOR. BOTH TWO WHEELERS AND 4 WHEELER PRIVATE VEHCILES . They must pay Rs.500 per litre . Public vehciles, autos, taxis, ola, uber, buses must be subsidised at Rs.50. per litre. Remove all taxes and duties on cycles. If required subsidises the buyer with a DBT. Electricity commpanies are so inefficient and costs to end consumer are absurd. Worst is TANGEDCO of Tamil nadu. Looters. Privatise them. Cut doen the electricty prices to Rs.4 per unit. Encourage electric two wheelers or a small car . Almost 80% of porivate cars carry hardly 1 or 2 people. Almost 100% govt cars are (mis)used for private purpose. STOP PROVIDING CARS TO GOVT EMPLOYEES. LET THEM USE OLA. No tax deducations on fuel expenses / vehcile depreciation/ vehcile vehcile maintenance / write-off and such expenses. ENOUGH OF BARBARIC ROAD TERRORISM BY PRIVATE AUTOMOBILE OWNERS 19% humans on 3% land mass usurp 1.23 trillion sq.ft for private parking. if any vehcile is found parked on road (other than paid parking lots) for more than 2 hours, confiscate the vehcile and make the owner pay Rs.1 lakh in fine
    Hudaf Shaikh25 days ago
    LIC should use this opportunity to acquire IDBI Bank -
    That said, it seems stupid for Government to divest shares in Coal India as Coal India dividend alone is around Rs 12 giving a yield of over 9% while the Government borrowing costs is below 6%.
    Instead, the Government should ask Coal India to give a generous interim dividend of say Rs 8 or 9 instead of just hoarding the money.
    The Economic Times