Disinvestment: Delisting of some sick CPSEs likely for better valuation

NEW DELHI: The government may delist some loss-making enterprises as it expects them to fetch a better valuation during strategic sales. Besides, there isn’t much trading in the shares of some of these companies, making it difficult to bring down the government’s holding to 75% as required.

A senior government official confirmed that three-four central public sector enterprises (CPSEs) are being considered for delisting but didn’t reveal any names. The Securities and Exchange Board of India (Sebi) has mandated a minimum 25% public float for all listed companies. State-owned firms have to meet this deadline by August 2018, following asecond extension for public sector units, which had been given three years to meet the norm.

Some of the companies in which the government holding continues to be around 90% or more include Fertilizers and Chemical Travancore Ltd (FACT), Andrew Yule & Company Ltd and HMT Ltd. FACT and HMT are loss-making companies. Scooters India, in which the government holds a 93% stake, made a Rs 10.28 crore net loss in FY17 after three years of profits.


The government has already announced its intent to exit from non-strategic, state-run companies. Companies lined up for strategic sales include Dredging Corp. of India, Pawan Hans, HLL Life Care, Central Electronics Ltd and Scooters India among others. “We expect the strategic sale process to pick up from next fiscal. In most cases approvals are in place,” said the official cited above.

The government has exceeded the disinvestment target for the first time, having already raised Rs 92,000 crore by selling stakes in state-run companies, against the Rs 72,500 crore originally budgeted for FY18.

ET View: Don't dither on divestment
The move to delist would make perfect sense provided there is prompt follow through and strategic sale. The government needs to kick-start the disinvestment process at the start of the financial year, in April, and not wait for a strong rally in stock prices, in a bid to garner better valuation. A wait-and-watch policy, and the marked volatility in the stock markets, can well dampen sentiments. In any case, with strategic sale and control on offer, investor interest should indeed be strong. Besides, disinvestment needs to be roundthe-year activity, so as to avoid bunching of stake sales.