Nov 12, 1999|
MoF considers new ways to meet disinvestment target
According to newspaper reports, the finance ministry (MoF) is once again toying with the idea of floating a special purpose vehicle or a special trust to enable the government to off-load shares of public sector units (PSUs) as part of their privatisation programme.
Under the special purpose vehicle (SPV) method, the government (administrative ministry) will transfer stakes that it wishes to divest to the SPV. The SPV will borrow money from the government to purchase these shares at an agreed price. Later, as and when it is feasible, the SPV will divest its holdings in the market. The money raised will be used to repay the borrowings and if any profit were to be generated it would be shared between the concerned ministries.
Under the trust option, the government's entire holding in companies that are to be privatised is to be transferred to a trust – National Shareholding Trust. The trust will be professionally managed and this is expected to generate investor interest in PSU stocks.
The government, it seems, is once again trying to meet the disinvestment target of Rs 100 bn by dubious means. In the SPV option there will be no net cash inflows atleast in the current year, and this will worsen the government's cash position, even though the fiscal deficit will stand reduced. The second option too would not lead to cash inflows in the near term.
The investor interest in Indian companies is apparent from the successful divestment of stakes in a number of PSUs over the last couple of years. The reason for considering alternative options is the lack of political will to divest stakes in the open market as is planned in the case of Indian Petrochemicals Limited (IPCL). This method will generate cash and also alleviate the government's fiscal deficit.
More Views on News
Jul 25, 2017
Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?
May 27, 2017
What happens when minority shareholders are short-changed in the normal course of business?
Feb 15, 2017
PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.
Aug 24, 2016
And here's your chance to claim a free copy of this book...
Aug 12, 2016
And Why India's demographic dividend could turn out to be a doubtful debt...
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407