FinMin banking on CPSE acquisitions, buybacks to meet FY19 disinvestment target

New Delhi: The Finance Ministry is banking on merger and acquisitions among CPSEs and share buybacks by state-run companies to meet the Rs 80,000-crore disinvestment target for the current fiscal. 

The government has raised more than Rs 9,600 crore through IPOs of three CPSEs and a tranche of Bharat-22 ETF in the first six months of the fiscal so far. A Finance Ministry official said there are liquidity constraints in the market for the past 3-4 months and such conditions would persist till there are uncertainties in global markets and crude prices remain volatile.

"We will meet the disinvestment target. We are looking at acquisition of some state-run companies with similarly placed CPSEs, like PFC and REC," the official said. To kickstart the merger and acquisition process, the Department of Investment and Public Asset Management (DIPAM) will soon invite bids from merchant bankers and legal firms to handle consolidation, starting with two such deals.

The government is looking to sell its 65.61 per cent stake in state-owned Power Finance Corporation (PFC) to Rural Electrification Corporation (REC), which could fetch about Rs 14,000 crore the exchequer.

Besides, the Finance Ministry has alsoo shortlisted about a dozen Central Public Sector Enterprises (CPSEs), including Coal India, NTPC, Nalco and NMDC, for a possible buyback of shares in the ongoing financial year. The list also include BHEL, NHPC, NBCC, SJVN, KIOCL and Hindustan Aeronautics.

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These CPSEs have been asked to buy back shares following the capital restructuring guidelines set out by DIPAM on May 27, 2016. The guidelines mandate that CPSEs having net worth of at least Rs 2,000 crore and cash and bank balance of above Rs 1,000 crore have to mandatorily go in for share buyback.

The boards of three CPSEs -- NALCO, NLC and Cochin Shipyard-- have already approved share buybacks together worth Rs 2,000 crore. "There will be about a dozen companies which will buy back shares. In view of the current market condition, we are not looking at any more IPOs and OFS at the moment," the official said.