NHPC, OIL, RITES set for divestment of govt's stake

NEW DELHI: Divestment of the government���s stake in public sector undertakings may kick off within three weeks of the new government taking over, according to a senior official in the finance ministry. The department of disinvestment (DoD) is completing the paperwork for initial public offerings to divest the government���s stake in NHPC, Oil India (OIL) and RITES, the official said requesting anonymity.

A senior DoD official confirmed the move. ���Depending on the final call of the new Cabinet, we can launch IPOs of the three companies in three weeks,��� said the official who didn���t wish to be named. The department has bagged regulatory approvals and all other preparatory works are expected to be completed before the new government is sworn in, he added.

The government expects to raise more than Rs 2,500 crore by divesting 5% stake in NHPC and 10% each in OIL and RITES.

Two other officials involved in the disinvestment process, whom ET spoke to, said investor appetite for public sector companies will be strong once the market stabilises. ���We think the Sensex is already at a comfortable level. It has recovered from about 8,000 in March to 11,000 now. It will improve after the formation of the new government,��� said a senior DoD official.

The government had put its disinvestment plans on the backburner in the second half of last fiscal as investor appetite was low and promoters could not afford to sell equity cheap.

Board for Reconstruction of Public Sector Enterprises chairman Nitish Sengupta pointed out that besides helping the government tide over fiscal deficit, it will also improve the governance of these enterprises.

Proceeds from disinvestment now flow into the National Investment Fund. As much as 75% of the earnings from such investments are channelised into social sector schemes.

A large corpus would also shore up earnings from its deployment. This, in turn, would lower the government���s direct expenditure on such schemes and thereby bring down its deficit to an extent.

The government has budgeted for a gross market borrowing of Rs 3,62,000 crore in the current fiscal year, higher than the revised Rs 3,06,000 crore borrowing in the previous fiscal, and any upward revision in the borrowing targets is expected to crowd out private investments.