Facing challenges in meeting the disinvestment target, the Department of Disinvestment believes that foreign investors are showing preference for government bonds over the PSU stocks on offer.
Government has mopped up Rs 12,700 crore in the first half of the current fiscal, highest recorded in the past seven years despite volatile market conditions.
However, it has a long way to go to achieve the budgeted target of Rs 69,500 crore for the full fiscal.
“DoD has been able to do well despite adverse market conditions. Also, the general preference of overseas investors appears to be for fixed income instruments like government bonds and financial sector stocks,” said a government official, adding that “DoD is having to make extra efforts to get foreign investors into PSU disinvestment programme”.
During auctions of G-Secs, government bonds have been subscribed multiple times, given the huge interest among foreign investors, while the demand for corporate bonds has been less.
The government has a pipeline of over a dozen PSUs for stake sale which includes RINL, NMDC, SAIL, Coal India, BHEL, OIL and ONGC, MMTC, Nalco and Hindustan Copper.
Admitting that disinvestment is a challenge mainly on account of global problems, Finance Minister Arun Jaitley had recently said the “metal stocks are not doing particularly well, and metal was a large part of kitty that we had planned for this year. I don’t think it makes sense divesting at a time when prices are low”.
Minister of State for Finance Jayant Sinha too said that disinvestment process is challenging because of global commodities slowdown and many identified PSUs are from this space. “Whether it is Coal India or OMCs (Oil Marketing Companies) and so on. They are impacted by global commodity prices.”
Overall, officials maintain that there is a lot of interest in India which has been described as a bright spot by the IMF, officials said, adding that overseas roadshows usually generate lot of interest especially in infrastructure and banking sector.
Notwithstanding the preference of foreign investors for financial sector stocks, host of FIIs including Fidelity, HSBC, Goldman Sachs, Citi and Morgan Stanley have pumped in funds in PSU disinvestments, they said.
State-owned companies accounted for 71 per cent of the Rs 17,000 crore that has been mopped up through equity issuances during the April-September of the current financial year.
Private sector companies, which have a cumulative market capitalisation of 88 per cent, raised only Rs 4,950 crore through initial public offerings (IPOs).
Indian equity markets have been volatile amid slump in the Chinese market as well as the Greek crisis and fears of impending rate hike by the US Federal Reserve.
The BSE Sensex has dropped by over 6.4 per cent between April and September.