Govt to divest 5% in NTPC, says more cos to follow

Pursuing its divestment agenda further, the government Friday announced that stake sales in NTPC, Rural Electrification Corp and Satluj Jal (an unlisted company) would go through in fiscal year 2009-10. Listed NTPC would see a disinvestment to the tune of 5% in which the government would raise Rs 8,100 crore, Divestment Secretary Sunil Mitra.

Recently, the Cabinet announced that all listed public sector undertakings (PSUs) should increase public shareholding to 10% while all profitable unlisted companies should go public. Mitra said the government had identified 50 unlisted public companies and 10 listed companies.


The government is focusing on divesting stake in PSUs to curb its burgeoning fiscal deficit. Roughly speaking, fiscal deficit is the difference between the government’s revenues and spending and India has run up a high deficit this year due to its spending to counter the effects of the global financial crisis.

The divestment secretary said he was in talks with ministries of steel, coal and telecom to explore possibility of stake sales in SAIL, Coal India and BSNL respectively.

“The listings would unlock shareholder value in the companies. We have begun inter-ministry talks to identify potential candidates for divestment. The divestment would be considered on a case-to-case basis,” Mitra said.

The government has been aggressively pushing to sell some of its stake in public companies. Recently, it listed NHPC and Oil India on the exchanges even though the initial public offers (IPOs) received a lukewarm response from investors and many experts thought the government had overpriced the issues.

This time though, the government would make sure it provides incentives for retail participation in the PSU stake sales, Mitra said. “The retail investor would benefit from the follow-on public offers (FPOs) [in case of listed companies], which would be priced at a discount to market price,” he said.