Centre’s divest plan to yield good returns

The government used to wait for the last quarter to divest after seeing what the tax collectors could mop up

The government’s proposal to start its targeted ` 69,000 crore divestment programme in the first quarter of this financial year and at regular intervals thereafter is a departure from the earlier strategy of waiting till the last quarter and can be expected to see good results saidmarket research analyst Jagannadhan Tunuguntla of Karvy Stock Broking.

“The underlying sentiment in the markets is bullish though volatile. Markets are near their lifetime high. Earlier governments used to wait for the last quarter to divest, after seeing what the tax collectors could mop up. At ` 69,000 crore it is the largest ever divestment in history of divestment in India,” he said. The government may also disinvest its holdings in SUUTI ( Special Undertakings of UTI) which are good, he said.

Mr Dhananjay Sinha, head, institutional research, Emkay Global Financial Services said since the divestment programme is spread over 12 months, there won’t be bunching at the end of the year. “But the government will have to create enough positivity through undertaking several reforms for the IPOs and FPOs. Historically it will be a tall task. Last year for instance the government could get barely little over ` 30,000 crore of its target. The ratio of success was 50 per cent.” Mr Sinha points out that in the last four years the success rate has been around 58 per cent and that too when the markets were buoyant. “So supply of shares will be created but it will to be positivity created through reforms,” he said.