The Centre has lowered its divestment target for the current financial year by over 55 per cent to Rs 78,000 crore as its big ticket privatisation proposals have seen a delay, pinning hopes on successful public listing of Life Insurance Corporation of India (LIC) to meet this year’s target. The disinvestment target for next year has been set at a conservative Rs 65,000 crore for the next fiscal.
Finance Minister Nirmala Sitharaman in her Budget speech said that “public issue of LIC is expected shortly and others too are in the process for 2022-23.”
As the Department of Investment and Public Asset Management (DIPAM) has realised Rs 12,030 crore during the current financial year 2021-22, this means the Centre is expecting a minimum of Rs 66,000 crore from the IPO of LIC. However, actual receipts from the LIC IPO, touted to be India’s largest, would depend on the offer size the government finalises, and the market conditions.
For the next year as well, the government has set an achievable target of Rs 65,000 crore even as it expects completion of big ticket privatisation of Bharat Petroleum Corporation (BPCL), and Shipping Corporation of India (SCI), among others.
The government has also not estimated any receipts from “disinvestment of government stake in public sector banks and financial institutions” for the ongoing and the next fiscal indicating that the privatisation of two public sector banks and one public insurance company may be deferred. The receipts from disinvestment of government stake in public sector banks and financial institutions had been estimated at Rs 1 trillion for this financial year.
The government, while targeting Rs 1.75 trillion receipts for this year, , had expected completion of big ticket privatisation proposals such as BPCL, SCI and launch of the LIC IPO. However, the second and the third wave of Covid-19 pandemic has led to procedural delays and made investors jittery.
The downward revision of disinvestment target for FY22 should make it achievable with the LIC IPO expected to be launched soon, said Sandeep Shah, managing partner at NA Shah Associates LLP.
“It would be interesting to see whether the government is contemplating downsizing the size of LIC IPO as early estimates were that more than Rs 1 trillion will be raised from the listing of the insurer. Currently there is no indication that valuations are a matter of concern,” Shah said.
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