India on Tuesday started promoting a share sale for computer maintenance and software firm CMC Ltd, the first of an unprecedented series of asset sales aimed at controlling deficits and reinvigorating its privatisation plans.
In the next six weeks, the government will offload residual stakes in five firms in which it has already shed management control - CMC, Indian Petrochemicals Corp Ltd, telecoms firm Videsh Sanchar Nigam Ltd, petroleum products retailer IBP and Bharat Aluminium Company Ltd.
In addition, there will also be two huge sales of shares in energy firms Oil and Natural Gas Corp (ONGC) and GAIL Ltd, which could raise over $2.5 billion between them. The government plans to sell stakes of up to 10 percent in each.
None of the issues has been priced yet, with merchant bankers and government officials saying prices will be set a day before the opening date of each issue.
"This is a historic phase in our capital markets," said Vallabh Bhanshali, chairman of Enam Financial Consultants Private Ltd, one of the book running lead managers to the CMC sale.
"This is the first time that we are going to have a series of government companies coming to the public in such quick succession," he told a conference to kick-start the CMC sale.
The CMC sale opens on February 23 while that of Indian Petrochemicals Corp Ltd starts on February 20.
The rush to market has been led by a booming primary market, in which recent issues have been heavily oversubscribed, as well as the government's need to raise funds to bridge a hefty fiscal deficit before the end of the financial year on March 31.
Valuations have also soared thanks to a sizzling run in the secondary market.
The government has targeted 145 billion rupees through asset sales by end-March. But the official Web site (www.divest.nic.in) of the Ministry of Disinvestment, which handles privatisation, showed asset sales have raised only 13.35 billion rupees so far this fiscal year.
Besides raising funds for the government, privatisation is also a key part of India's move towards a more market-oriented economy and is seen as a key element in convincing overseas investors of the country's commitment to reforms.
After nearly half a century of socialist ideology and a planned economy, India launched an ambitious programme of economic reforms in the early 1990s to open up the economy.
The government started with minority stakes sales in state-run firms. Despite stiff resistance from labour and political opposition, it has since moved towards full-fledged privatisation where it cedes management control to the private sector.
In addition to the government's stake sales, there is a slew of fresh public issues by listed companies and initial public offerings in the pipeline. Analysts say total supply this year could exceed $10 billion.
Comments
Comments are closed.