Govt to revive divestment panel to push strategic stake sales in state-run cos

New Delhi: The government will set up a Disinvestment Commission to push strategic stake sales in state-run companies and will offload 20-26% in IDBI Bank through a qualified institutional placement ( QIP), minister of state for finance Jayant Sinha told TOI.

Strategic sales in state-run companies are expected to be the big theme in 2016-17.

A strategic sale is the transfer of shares to an institution with management control. QIP is a fund-raising process through issue of securities to institutional buyers.

“As far as strategic disinvestment is concerned, we have to once again establish the institutional mechanisms that were in place in NDA-I to be able to do strategic disinvestment, which included a Disinvestment Commission… That Disinvestment Commission is once again being created so that we can go ahead and do strategic disinvestments,” Sinha said in an interview.

The government had planned to push through strategic sales in 2015-16 but policy hurdles prevented it from pursuing the idea. The Narendra Modi administration now seems determined to push through strategic sales.

The first Disinvestment Commission was set up in 1996 and two subsequent panels recommended strategic sales in some state-run companies and helped cut delays in resolving interministerial issues. The panel was wound up in 2004 after the UPA was voted to power. Sinha said the government’s stake can drop below 49% in IDBI Bank as there is no need to amend any act as it comes under the Companies Act.



For the moment, it will hold majority stake. “We have been considering what is the right way for the transformation to go forward, and therefore, as part of that we have undertaken this QIP somewhere between 20%-26%,” said Sinha.

“So depending on how much of the QIP they (investors) decide to subscribe to we are open to giving them a board seat. Once they have a board seat, then they become capable of being part of the overall governance of the company,” said the minister.

The government owns over 80% in IDBI Bank and will retain 50% after the QIP. Sinha said the transformation of IDBI Bank would be similar to that of Axis Bank. “It’s a multi-stage process,” said Sinha. Asked about strategic sales in state run hotels, he said the government would want to get the valuation right before proceeding on the issue “as the people want to be able to get a reasonable valuation for them”.