As part of its plan to meet the fiscal deficit target for FY19, the government is looking at asking some large PSUs to purchase its stakes in other state-owned entities, but this sort of ‘disinvestment’ would entail a much higher level of public borrowing than the deficit number would reflect.
In what could be a repeat of ONGC-HPCL deal last year, Rural Electrification Corporation (REC) may be nudged to acquire the Centre’s 65.64 per cent stake in Power Finance Corporation (PFC). However, since REC’s current cash surplus is just Rs 1,774 crore, it would need to raise a big amount from the market to fund the acquisition, which at current market prices is seen to be Rs 16,800 crore plus a likely premium.
For the sale of the Centre’s HPCL stake to ONGC last year, reference valuation was at a 14 per cent premium, which fetched the Centre Rs 36,915 crore.
The upstream oil firm financed the deal with market borrowing of Rs 25,000 crore. If the premium is kept at the same level and assuming the market prices are same as today when the deal materialises later in the year, the government could get nearly Rs 19,000 crore from REC’s purchase of its stake in PFC.
On Monday, the PFC stock closed at Rs 96.85, up 12.16 per cent from the previous close.
Analysts feel such deals between PSUs are not markedly different from budgetary borrowings by the Centre and could hence put pressure on bond yields.
With its finances under stress and an obligation to sustain the public spending momentum, the Centre has lined up plans to raise a massive Rs 1.7 lakh crore via the extra budgetary resources (EBR) in the current fiscal, up 110 per cent from FY18. —FE