The Centre has managed to raise approximately Rs 22,600 crore — about 38 per cent of its full-year disinvestment target of Rs 58,425 crore — by selling 10 per cent of Coal India Limited through the “offer for sale through stock exchange” route. While the offer for sale was just oversubscribed (by 1.04 times), retail investor participation — 20 per cent of the shares were set aside at a 5 per cent discount on the floor price for retail investors — was subdued with only approximately 42 per cent of the quota being subscribed. This may partly have been because the swiftness with which the government announced and executed the plan caught retail investors unawares.
The Centre’s urgency was probably fuelled by the fact that by end-November, the fiscal deficit, which is aimed at 4.1 per cent of the GDP, was already 99 per cent of the full-year target. This, in spite of the headroom created by falling oil prices. The government is said to be ready to follow up the Coal India sale with share sales of Oil and Natural Gas Corporation, Power Finance Corporation and Rural Electrification Corporation this fiscal. While it is good that the Centre is finally moving on the disinvestment agenda, the bunching up of sales towards the end of the fiscal is undesirable and inadvisable as it puts investors and markets under pressure. Indeed, given that the Sensex is up by 25 per cent since last April, it is inexplicable that aside from the 5 per cent Steel Authority of India Limited sale, there was no other disinvestment. Ideally, stake sales should be spread out over the entire year.
Further, the route that the Centre used to offload shares — offer for sale through stock exchange — was originally devised by the Securities and Exchange Board of India as a way for promoters to dilute their holdings in order to comply with regulations. It was not intended to be used as a method to raise capital. The government should rather have floated a follow-on public offer — in 2010, Coal India was listed through an initial public offer that was oversubscribed 15 times. This would have been in the fitness of things.