The government's disinvestment programme made a muted re-start with the Cabinet Committee on Economic Affairs approving the part-sale of its stake in two power companies -- NTPC and Satluj Jal Vidyut Nigam -- but postponing a decision on the overall disinvestment policy.
The 5 per cent disinvestment in NTPC and 10 per cent in SJVNL, announced by commerce and industry minister Anand Sharma on Monday, is likely to fetch the government around Rs 10,000 crore (Rs 100 billion) this year.
The first tranche of disinvestment, during the UPA government's second tenure, had recently fetched it Rs 4,200 crore (Rs 42 billion), much above its budgetary target of Rs 1,120 crore (Rs 11.2 billion), by selling equity in NHPC and Oil India Ltd.
After this round of disinvestment, the government's stake in the Bombay Stock Exchange-listed NTPC Limited will fall to 84.50 per cent. At current valuation, the government may be able to raise around Rs 8,600 crore (Rs 86 billion) by selling 5 per cent stake in NTPC, the country's largest thermal power generator with over 30,000 Mw of annual capacity and a market capitalisation of Rs 1,72,000 crore (Rs 1,720 billion).
A government press release said NTPC's market capitalisation would rise after the disinvestment, which would help the company raise resources in the international market. The government first divested 5 per cent in NTPC in 2004, when the company also raised fresh equity of 5 per cent. The initial public offer then fetched Rs 5,300 crore (Rs 53 billion).
SJVNL, which is a 75:25 unlisted joint venture between the Centre and the Himachal Pradesh government, has a paid-up capital of Rs 4,108.81 crore (Rs 41.08 billion) and focuses on hydro power projects.
H K Sharma, chairman and managing director, SJVNL, told Business Standard the issue could easily be priced at Rs 30 to Rs 35 a share and could fetch the government Rs 1,000 crore (Rs 10 billion) to Rs 1,200 crore (Rs 12 billion).
"It is just disinvestment of government equity since we have sufficient resources to fund the equity portion of our projects," he added.
Meanwhile, the minister said no decision was taken on the National Investment Fund, the fund that was supposed to receive disinvestment proceeds for social sector spending.
The government had proposed to keep the NIF in abeyance and put disinvestment proceeds into the Consolidated Fund of India in view of the huge gap in government finances this year. Officials said the agenda also included disinvestment in about half a dozen companies.
Finance minister Pranab Mukherjee had earlier indicated that the government would come out with a roadmap for disinvestment.
Kuljit Singh, partner, Ernst & Young labelled the government's approach a good starting point. "At least it shows that the government is keen to meet part of stimulus cost through disinvestment," he said.
He added that the piecemeal approach to disinvestment was acceptable because of the potential of a big- bang approach to cause controversy.
On the specific reason for looking at power PSUs, he said the power sector valuations are highest. "Five per cent of NTPC is a large amount. Like a rational promoter, the government is trying to encash positive sentiments but it has to be careful about valuations since power stocks have not given much return to investors," he added.
