New Delhi Government is considering buyback and offer for sale (OFS) of Central Public Sector Enterprises (CPSEs) as possible options to meet the current year’s disinvestment target because of uncertain market conditions and legal hurdles for ongoing privatization transactions. Presents challenges.
A senior official said on condition of anonymity, “All ongoing strategic transactions will be spread over the next financial year… buybacks, some OFS where there is room to meet the minimum public shareholding norms, could be considered.” Could.
OFS enables the existing company shareholders to sell their shares to the public through the exchange in a fair and transparent manner, while buyback allows the company to repurchase its shares from its shareholders. Buyback more likely since government acquires 497 crore from just one instance of share buyback by GAIL (India) Ltd. last year. According to a study by Bank of Baroda on disinvestment, CPSE stocks will outperform Sensex in 2021 and 2022.
Disinvestment proceeds of the current year have exceeded 31,000 crore but remain below the revised target of 50,000 crores. it fell short of the target 65,000 crore earmarked in the FY23 budget. Strategic disinvestment or sale of all or 50% or more government shares in central public sector enterprises, along with transfer of management control, is unlikely to reduce the current gap. Volatility in crude oil prices and the global shift towards green energy forced the strategic sale of Bharat Petroleum Corporation Limited to be put on hold. The sale process of prime assets has been delayed due to the demergers of Shipping Corporation of India and BEML. The government has also blocked NMDC Steel, HLL Lifecare and PDIL, but sales have not picked up.
Peppermint had earlier reported that the government was forced to abandon the strategic sale of Pawan Hans Ltd and Central Electronics Ltd after several attempts due to legal challenges. In the case of Pawan Hans, the government had not issued the letter of intent, while in the case of Central Electronics, the government had not signed the share purchase agreement with the winning bidder. The executives, requesting anonymity, said the strategic sale is unlikely to be revived in any case.
The government’s plan to sell its remaining 29.5% stake in Hindustan Zinc Ltd, where Vedanta Resources holds 64.9%, in tranches of around 5-10%, is unlikely to happen even in the near term due to uncertainties. The company’s board approved the purchase of global zinc assets of Vedanta for about $2.9 billion, but the move faced opposition from government officials in the Ministry of Mines, which is part of the board.
The government is set to object to Vedanta’s purchase of global zinc assets at the next shareholders’ meeting, where it will highlight concerns about the third party nature of the transaction.
“We will oppose the transaction through the Ministry of Mines at the AGM/EGM and reject the proposal as it is not in the interest of the minority shareholders. This is a related party transaction, which requires far more due diligence, but till that time, any plan for disinvestment of our shareholding cannot go ahead,” said a second official on condition of anonymity. .
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