The disinvestment saga

The disinvestment process has been through a roller-coaster ride. In the latest development, the swadeshi lobby is pitted against the supporters of disinvestment once again. Round one has seen the disinvestment of two major oil companies, namely, Hindustan Petroleum and Bharat Petroleum, being put off for the next three months. Attention has now shifted to other companies lined up for divesting their stake. Till now, however, everything seemed to be proceeding smoothly. The disinvestment process has picked up steam, as more and more companies have been put on the block for a sale of stake. The success of the efforts(towards disinvestment) can also be gauged from the fact that a lot of funds have actually flowed into government coffers. The amount garnered during the first four months of this fiscal is nearly equal to what was raised during the whole of the last financial year. The success of the entire process is being considered not only as a boost to the agenda of economic reforms, but is also important from the financial angle. This is because receipts from disinvestment can play a crucial role in government finances, considering the fact that there could be a hefty outflow on account of the drought-like situation in the economy. The figures, by themselves, tell their own tale. Collections have shown a strong rise. During â€˜00-01, the government was able to raise a sum of Rs 1,873 crore from the disinvestment process. This figure shot up to Rs 3,436 crore in the next year. But the important part is that with just less than half the financial year through, the collection figure has already reached Rs 3,190 crore. In the current financial year, the month of May witnessed a lot of action. Rs 2,576 crore was raised through big ticket disinvestments like the sale of IPCL to Reliance for Rs 1,491 crore and the picking up of Maruti Udyogâ€™s stake by Suzuki. In the case of Maruti, the disinvestment proceeds consist of the `renunciationâ€™ premium given by Suzuki Motor to the Indian government. All the other disinvestments, except for the sale earlier in several oil companies where a PSU picked up the stake, were effected by the competitive bidding process through sale of the governmentâ€™s stake to a strategic partner along with transfer of management control. As against this, Rs 170 crore was raised in the month of July. All of it through the sale of hotels across the country. Earlier, during April â€˜02, the sale of Hindustan Zinc was responsible for the large inflow of Rs 445 crore. The current financial year shows a divergence from the earlier trend because more private participants have managed to pick up the large disinvestments. This is unlike the earlier situation where the big ticket sell-offs were mainly picked up by public sector players. Many critics have regarded it as not being actual disinvestments. In the last three years, the biggest amount has been raised by IPCL, with VSNLâ€™s sale to the Tatas coming a close second at Rs 1,439 crore. Sector-wise, a record number of 21 hotels were sold during the last three years and this raised over Rs 600 crore which is quite significant. If we take a look at the companies which fetched a significant premium to their reserve price, IBP leads the field in percentage terms. The final price was 242% higher than the reserve price fixed for it. Hotel Indraprastha and Hotel Manali Ashok both garnered more than double their reserve price set by the government. IPCL, too, saw the government managing 76% more than the reserve price, which is significant considering the high base amount of the reserve price. Inspite of the recent developments, there is optimism in the market that the action on this front is likely to continue. Analysts expect the attention to shift to smaller little-known companies, which are likely to have little opposition to strategic partners. Some of the companies in this list are Rashtriya Chemicals and Fertilisers, National Aluminium, Shipping Corporation of India and State Trading Corporation of India among others. Related Reports: Â Central units: Many heroes in the making Â State units: The bottomless pit Â Â Some stand tall, others fall

The disinvestment saga

The disinvestment process has been through a roller-coaster ride. In the latest development, the swadeshi lobby is pitted against the supporters of disinvestment once again.

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