India's divestment target in 2024/25 could be its lowest in nine years -source

IDBI Bank

05/01/2024 11:13

By Nikunj Ohri
       NEW DELHI, Jan 5 (Reuters) - India could set a target
for divestment from state firms in fiscal 2024/25 that falls
short of this year's goal to stand at the lowest in nine years,
as the government turns its focus to general elections due next
year, a senior official said.
    The government official, who spoke on condition of
anonymity, did not give an exact figure as the finance ministry
is preparing the national budget for next year, to be presented
in parliament on Feb. 1.
    Setting a figure below this year's divestment target of 510
billion rupees ($6 billion) would make it the lowest since the
400 billion rupees set in fiscal 2013/14, when Prime Minister
Narendra Modi stormed to power for his first term. 
    Still, a lower target for the next fiscal year, which begins
on April 1, looks likely as the government is unsure whether
regulatory delays will allow it to complete the sale of a
majority stake in IDBI Bank  IDBI.NS , the official added. 
    "There is no clarity on when the 'fit and proper' vetting
would be completed, and there will be other approvals required
from the RBI once a buyer is shortlisted, making the process
time-consuming," the official said.
    The official, who sought anonymity as finance ministry
officials are not allowed to speak to the media during budget
preparation, was referring to the central bank, the Reserve Bank
of India.
    India's finance ministry did not immediately respond to
Reuters email request for comment.
    When completed, the sale of IDBI Bank is expected to bring
more than 200 billion rupees ($2.4 billion) into government
coffers, according to a Reuters calculation based on its share
price.
    The impending elections may shift the government's focus
away from divestment and privatisation, the official said.
    Governments are generally cautious about launching such
exercises ahead of elections, because of the risk of opposition
from employees and their powerful unions.
    Modi's government has met its privatisation and divestment
target only twice in the last decade, even though his
government's track record outstrips that of any previous
administration. 
    Despite aiming in 2020 to divest state-run firms in sectors 
from banking and insurance to transport and energy, the
government's only notable success was Air India, while lack of
interest forced it to withdraw others, like Bharat Petroleum
Corp  BPCL.NS .
    The government official added that the scope for sales of
minority stakes in some big state-run companies has narrowed.
    This is because the government's shareholding has hit the
permissible limit of 51% in many such firms, limiting its
ability to raise funds through such sales, he added.
    Lowering the divestment target shows the government may be
reassessing its policy and may want to focus on running such
exercises professionally, said Sandeep Shah, managing partner at
a consulting firm, N.A. Shah Associates LLP.
    "The recent large dividend payouts, coupled with
profitability of public sector companies, and investor interest,
can be a trigger point," Shah added.
    India foresees the dividend payout from state-run firms this
fiscal year to exceed government expectations.
($1=83.1390 Indian rupees)

 (Reporting by Nikunj Ohri; Editing by Clarence Fernandez)
 ((nikunj.ohri@thomsonreuters.com; +91 90284 60730; Reuters
Messaging: twitter.com/nikunj_ohri))