As the Indian stock markets are showing signs of buoyancy, initial public offerings (IPOs) are slowly gaining momentum. And certainly, this has charmed many unlisted companies. Well, even the government doesn't wish the miss the IPO bus. With the economy expected to turn around and revived investor appetite, the government is aiming to unlock some value from the many unlisted Public Sector Undertakings (PSUs). This would also enable the government to achieve its fiscal goals.
As per an article in Business Standard, profit-making unlisted PSUs may have to submit listing plans while signing annual performance pacts with the government. The Finance Ministry has suggested to the Department of Public Enterprises (DPE) to mandate a listing clause under the new MoU (Memorandum of Understanding) norms for PSUs.
The move is aimed to assist the Centre in unlocking the value of many state-owned firms. At present, only 43 out of about 160 profit making CPSEs (Central Public Sector Enterprises) are listed on the BSE. The majors, which are yet to be listed, include Rashtriya Ispat Nigam Ltd (RINL), ONGC Videsh, subsidiaries of Coal India Ltd, Airports Authority of India and Hindustan Aeronautics Ltd.
If the IPOs of unlisted PSUs get through successfully, it will enable the Centre to achieve its disinvestment targets. So far, the government has been missing its disinvestment targets consistently for the last five years. For current fiscal, the government has estimated to raise Rs 695 bn from the sale of stake in PSUs. If the same can be met, it will cater to many economical objectives. Some of them will be-
Reduction of financial burden on the government
Improvement in public finances
Kick-starting diversification and expansion programmes
Promoting healthy competition and market discipline
It will be interesting to see how the government goes about with its disinvestment programme. Which PSUs will hit the primary markets first? Will the valuations offer retail investors enough room for gains? Stay tuned to our IPO section for updates and views on upcoming IPOs.