| India looks to mop up $2.6b from stake sale |
NEW DELHI The cabinet approved stake sales in four state companies on Friday, restarting a stalled divestment programme as part of a broader push to revive a reform agenda aimed at kick-starting economic growth and shoring up public finances.
The cabinet approved the sale of 9.5 per cent in Hindustan Copper, 12.15 per cent in National Aluminium Co, 9.33 per cent in trading firm MMTC and 10 per cent in explorer Oil India, minister of trade and industry Anand Sharma told reporters.
At current market prices, the stake sales would raise about $2.6 billion for the government. New Delhi aims to raise Rs300 billion through share sales in state-run companies in the current fiscal year that ends next March, but has thus far drawn a blank as weak market conditions have deterred public issues or auctions.
The government has already approved a share sale in Steel Authority of India Ltd and an initial public offering in steelmaker Rashtriya Ispat Nigam, which together were expected to fetch close to $1 billion, but the offers have not yet materialised. Market sentiment has picked up over the past couple of months, however. BSE Sensex has rallied more than 19 per cent so far in 2012, compared with a 12.6 per cent gain in the MSCI Asia-Pacific index excluding Japan, with most of the gains since June.
“We are seeing a pronounced rally and this is quite nicely programmed,” said Saurabh Mukherjea, head of equities at Ambit Capital. “My sense is we would see the divestments go through, but they should hope to get through as much as they can between now and Christmas.”
Indian Finance Minister had last month asked officials to expedite the process of disinvestment so that state-owned companies could hit stock markets in time and help the government achieve the target of Rs300 billion in the current fiscal. Although five months have passed in the current fiscal, the government so far has not been able to come out with a public issue.
Raising adequate funds from disinvestment was necessary to keep in check the fiscal deficit which is facing pressure due to rising food, fuel and fertiliser subsidy bills. The government earlier deferred the initial public offer (IPO) of Rashtriya Ispat Nigam (RINL) due to weak stock market. The Rs25 billion RINL issue was proposed to hit the markets in July. Due to uncertain market conditions, the government in the last fiscal could raise only Rs140 billlion from disinvestment against the target of Rs400 billion
Agencies
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