Sell-offs aren't small change

The good news is that buoyant disinvestment receipts, pegged at Rs 14,500 crore by the finance minister, are for a change expected to contribute to fiscal correction rather than to worsening the fiscal situation.
The bad news is that the revised estimates of disinvestment proceeds for 2003-04 indicate that the small investors will not be able to buy the government holding in six companies cheap in the forthcoming public offerings.
The revised estimates — up a good 10% over the budget estimates — would require the six public offerings of PSU stocks to yield about Rs 13,165 crore. This is assuming that no strategic sale of government holding in any PSU would be completed in what remains of this fiscal, an assumption that seems quite reasonable. The government has so far earned Rs 1,335 crore from sale of holdings in Maruti Udyog Ltd, Hindustan Zinc Ltd and Jessop and Co.
The target for the next fiscal year has been set at Rs 16,000 crore, 10% more than the revised estimate for the current year.An interesting feature of disinvestment is that most of the proceeds this year are coming in from public offerings, rather than through the government’s preferred route of strategic sales. If the shares are offered at today’s closing prices (see table), the yield would be about Rs 13,600 crore.
If, on the other hand, the lowest price of the last 52 weeks of the six scrips is taken as the most conservative price, sale of holdings in the six companies would yield only Rs 6,400 crore.
The actual earnings may be somewhere in between these two extreme estimates, unless of course, the plan is to offload most of these shares to institutional investors, particularly FIIs. In case that is the strategy to be adopted, the pricing of the offers could be high. But that would be contrary to the stated objective of finance minister Jaswant Singh, which is topromote the equity culture among the citizens of the country.
The government has lined up six public offerings — IPCL, CMC, IBP, Dredging Corporation, ONGC and GAIL. The six issues would open for subscription in a sequence finalised by the government starting February 16.
If the collections from disinvestment of government holdings reach and even exceeds it, the NDA government would have created a record of sorts. The disinvestment target has been exceed only thrice since the governments of the day resorted to selling stakes in PSUs to raise resources to lower the fiscal deficit.
The first time the target was exceed was in 1991-92, when the sale of shares realised Rs 3,038 crore against a target of Rs 2,500 crore. The second occasion was in 1994-95, when the realisation was Rs 4,843 crore against the target of Rs 4,000 crore and finally in 1998-99, when against a target of Rs 5,000 crore, the government made Rs 5,371 crore. In most other years, as the panel on top of this page shows, targets have proved elusive.