The government on Friday decided to list six central public sector enterprises (CPSEs), including National Seeds Corporation and RailTel, on the stock exchanges and permitted KIOCL to come out with a follow-on public offer. The Centre’s decision to list these companies comes in the backdrop of the government struggling to meet this year’s fiscal deficit target of Rs 80,000 crore. The government’s plans for strategic disinvestment in 24 CPSEs including privatization of Air India, as announced in the current year’s, budget are yet to bear fruit.
The Cabinet Committee on Economic Affairs (CCEA), in its meeting Friday, approved initial public offers (IPOs) for six companies – Telecommunication Consultants (India) Ltd (TCIL), RailTel Corporation of India Ltd, National Seeds Corporation Ltd (NSC), THDC India Ltd, Water & Power Consultancy Services (India) Ltd (WAPCOS) and FCI Aravali Gypsum and Minerals (India) Ltd (FAGMIL). KIOCL, or Kudremukh Iron Ore Company, will come up with a follow-on public offer.
Govt also plans for disinvestment in 24 CPSEs
The Centre’s plan to list six new companies on stock exchanges comes at a time when the volatility in the stock markets, uncertainty due to next year’s general elections and tepid investor appetite pose hurdles for the move. Apart from the six new PSUs that are lined up for initial public offers, the government’s plans for strategic disinvestment in 24 CPSEs including privatization of Air India, and listing of merged entity of three general insurance companies, continue to hang fire.
The listing of the CPSEs on exchanges would unlock their value and encourage investor participation, Law Minister Ravi Shankar Prasad said while briefing reporters on the Cabinet decisions. He said the Alternative Mechanism, which comprises the Finance Minister, Transport Minister and the minster of the concerned ministry, has been empowered to decide on the extent, mode of disinvestment, pricing, and timing of CPSEs to be listed.
As on Friday, the Centre could raise Rs 34,142.35 crore as disinvestment proceeds against the full year target of Rs 80,000 crore during the current financial year (2018-19), as per data available with Department of Investment and Public Asset Management. The government is hopeful of meeting the target on the back PSUs share buybacks, interim dividends and purchase of government equity by companies operating in same sector (for instance, Power Finance Corporation buying out the Centre’s stake in Rural Electrification Corporation).
The government’s plan of merging three public sector general insurance companies National Insurance Company Ltd, United India Assurance Company Limited and Oriental India Insurance Company Limited, into a single insurance entity and then listing them on the exchanges is yet to fructify. With volatility in the equity markets making it difficult for the government to sell stakes in the markets, public sector companies are helping the Centre’s task of raising resources through stake sales.
Most IPOs of the government companies in the past two years have not been fruitful to investors. Share prices of companies – including Garden Reach Shipbuilders & Engineers Limited, Ircon International Limited, The New India Assurance Company, General Insurance Corporation Of India – which were listed on the stock exchanges are trading much below the issue price. This has resulted in steep losses to the IPO investors and dented demand for shares of government companies coming up for listing.
Of the six CPSEs, TCIL is an engineering and consultancy firm under the administrative control of Department of Telecommunications. WAPCOS, a Mini Ratna-I category technology-driven consultancy and engineering-procurement-construction organisation, falls under the Ministry of Water Resources. RailTel Corporation of India is also a ‘Mini Ratna’ enterprise focusing on providing broadband and VPN services.
The National Seeds Corporation (Schedule B-Mini Ratna Category-I company) is under the administrative control of Ministry of Agriculture and Farmers Welfare. THDC India, a company jointly owned by the Government of India and the Government of Uttar Pradesh, was incorporated to develop, operate and maintain the Tehri Hydro Power Complex and other hydro projects.