In­dia to weigh pri­vate place­ments to boost as­set sales

The Pak Banker - - BUSINESS -

In­dia may ex­pand the use of pri­vate place­ments to sell stakes in state-owned com­pa­nies in a bid to get bet­ter prices for its shares, ac­cord­ing to of­fi­cials with di­rect knowl­edge of the mat­ter.

The govern­ment cur­rently al­lows so-called qual­i­fied in­sti­tu­tional place­ments, known as QIPs, only among pub­lic sec­tor banks. The pol­icy shift would al­low dozens of other govern­ment-owned com­pa­nies to sell di­rectly to big in­vestors, ac­cord­ing to two of­fi­cials, who asked not to be iden­ti­fied be­fore a fi­nal de­ci­sion is taken.

The move would come as Prime Min­is­ter Naren­dra Modi seeks more funds to build roads, ports and bridges in Asia's third-largest econ­omy when he presents his bud­get on Feb. 29. In­dia is on pace to miss its as­set sale tar­get for a sixth straight year, rais­ing only about 20 per­cent of 695 bil­lion ru­pees ($10 bil­lion) through Jan­uary as lower com­mod­ity prices and volatile mar­kets af­fected val­u­a­tions.

Pol­icy mak­ers want an al­ter­na­tive to the cur­rent prac­tice of no­ti­fy­ing in­vestors two days ahead of a sale to pre­vent spec­u­la­tors from driv­ing down the share price, the of­fi­cials said. Me­dia leaks prior to the of­fi­cial an­nounce­ment have of­ten caused stock prices to fall in the weeks be­fore a sale. The BSE Ltd. on Fri­day said it cut the no­tice pe­riod to one day for so-called of­fer for sale and al­lowed retail in­vestors to place their bids a day later.

In­dian Oil Corp, the big­gest stake sale of this fi­nan­cial year, lost 17 per­cent in the month be­fore its sale on Aug. 24, com­pared with an 8.4 per­cent de­cline in the bench­mark in­dex. Steel Au­thor­ity of In­dia Ltd. and Coal In­dia Ltd. -- the world's big­gest miner of the fuel -- had sim­i­lar ex­pe­ri­ences when they sold shares.

In­dia has ap­provals to sell more shares to the pub­lic in over a dozen com­pa­nies, in­clud­ing Coal In­dia, Oil & Nat­u­ral Gas Corp Ltd. and NTPC Ltd., ac­cord­ing to in­for­ma­tion avail­able on a govern­ment web­site.

The govern­ment, which had pre­vi­ously avoided cherry-pick­ing in­vestors for share sales to avoid ap­pear­ances of nepo­tism, is look­ing at all op­tions used by pri­vate com­pa­nies to tap the mar­kets, the of­fi­cials said. They are study­ing ways to keep the pri­vate place­ment process trans­par­ent, they said, adding that any de­ci­sion would need cab­i­net ap­proval. D.S. Malik, a Fi­nance Min­istry spokesman, didn't an­swer two calls to his mo­bile phone.

A new strate­gic sale

pol­icy would be an­nounced shortly, Dis­in­vest­ment Sec­re­tary Neeraj Ku­mar Gupta said in an in­ter­view this month. With Modi's ad­min­is­tra­tion poised to miss the di­vest­ment tar­get, it has sought to raise cash by ask­ing at least five state-run com­pa­nies to buy back shares with their sur­plus cash of $12 bil­lion.

Modi faces the chal­lenge of keep­ing next year's bud­get deficit at 3.5 per­cent of the gross do­mes­tic prod­uct with­out cut­ting pub­lic spend­ing. Tax rev­enues and stake sales are key to meet­ing that tar­get and keep­ing in­vestors in­ter­ested in In­dia af­ter the ru­pee, sov­er­eign bonds and stocks saw their worst month in four years.

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