With the government setting the ball rolling for divestment of its stake in state-owned companies, investors are buying into select public sector companies like Dredging Corporation of India, STC India and MMTC.

Over the past few trading days, some of the smaller PSU stocks were locked in 20 per cent upper circuit with huge volumes traded on bourses.

PSU stocks were in the limelight on reports that the Cabinet has approved divestment of its entire stake in Dredging Corporation in which government holding at present is 74.38 per cent. The government last week decided to sell its entire holding in Dredging Corporation and this fuelled a rally in the shares of smaller PSUs, analysts said.

Dredging Corporation, STC India, MMTC, Shipping Corporation of India (SCI), Hindustan Copper and Rashtriya Chemicals & Fertilizers are seeing huge buying interest.

“The government plan to sell the entire stake in Dredging Corporation is a positive move and that has triggered a rally in smaller PSUs where the government may look at selling its entire stake,” said Vijay Singhania, founder of Tradesmart.com.

“The market is expecting that value unlocking by strategic sales in some PSU companies will take place soon,” he said.
According to another analyst, the government will aggressively go ahead with its divestment programme to raise funds in this financial year. The government plans to raise Rs 72,500 crore through disinvestment in central public sector enterprises in 2017-18, which is higher than the Rs 45,500 crore raised in the last financial year. The government plans to raise Rs 15,000 crore via a strategic sale in the current fiscal out of its total disinvestment target of Rs 72,509 crore.

Besides, the takeover of HPCL by ONGC in an about Rs 30,000-crore deal is in progress. The Cabinet had last year given an in-principle approval for strategic sale in public sector companies including Bharat Earth Movers, Scooters India, and Pawan Hans. It had also given an in-principle approval for sale of Salem, Durgapur an­d Bhadrawati units of Steel Authority of India Ltd and Nagarnar Steel Plant of NMDC. According to reports, the government has invited bids to sell its entire 98.99 percent stake in National Projects Construction Corporation (NPCC) and 100 percent each in Hospital Services Consultancy Corporation (HSCC) and Engineering Projects (India).

The stake sale move is in line with the announcement Finance Minister Arun Jaitley made in his Budget for 2017-18 outlining the desire to merge PSUs to create large state-owned firms. “The government has ‘in-principle’ decided to disinvest its entire equity shareholding in NPCC along with transfer of management control through a competitive bidding process by way of acquisition by a similarly placed CPSE through sale of equity shares,” the

Department of Investment and Public Asset Management said while inviting bids.