
After revising down the disinvestment target for 2021-2022, the government kept conservative target of 65,000 crore for 2022-2023. Out of which major portion was expected to come from LIC IPO. But the poor performance of the IPO has shown government’s inability to fetch higher prices for its assets. The target for the last two years was highly underachieved. Government was able to realize only 16 % of the total 2.10 lakh crore target for FY 21 while only 7 % (around 13,000 crore) was realized out of FY 2022 Target of 1.75 lakh crore. The privatization plan for two public sector banks also hit roadblock due to bank union’s protest. These two banks were expected to generate significant capital receipt for the government. So, government seems reset its expectations and choose to be conservative in its approach for this year’s target.

Out of the target of 65000 for the current fiscal year, government has already received 20,560 crores from LIC’s IPO. It is nearly one third of this year’s target. Other disinvestment plan’s include Bharat Petroleum Corporation Limited (BPCL), Shipping Corporation of India (SCI), Central Electronics Limited (CEL), Pawan Hans Helicopters (Arm on ONGC), Bharat Earth Movers Limited (BEML) and Container Corporation of India (CONCOR). IDBI is also being planned out by the government.
LIC IPO’s poor performance-
Government had sold 3.5 % of its stake in Insurance giant of India. It has fetched government around 21,000 crores. But against the expectations it got listed at discount of 9% at 865 against the issue price of 949. The price further got declined around 7 % in next 5 trading sessions despite Nifty on rising trajectory. It lost market cap of 77000 in 4 trading sessions.
The poor response is due to the shaky financials and inefficiencies in the organization. Also, the valuation of the company was kept very high. LIC was valued at 6 trillion during the issue. This led to very high price to earning (PE) ratio of 202, which is way higher that its peers.

Not only LIC but several other state-run companies that were listed earlier are trading much below their listed price.

The timid response to LIC’s IPO will be a challenge for the government for further disinvestment process.
BPCL:
BPCL is by far the largest entity listed for disinvestment. Government is planning 40,000 crores out of this. BPCL is the largest oil marketing company after Indian Oil and third largest oil refinery. However, there is poor response and no major business house has shown interest in it. Government earlier invited Expression of Interests (EOI) in 2020, but received only 1 bid. Now in 2022, government is again planning to call for bids. The reason for lack of interest is that the companies do not enjoy pricing freedom in India. Petrol prices are highly regulated and kept changing under the influence of politics. Also, the highly regulated energy sector, creates hurdles for the company to carry out necessary changes. The global push for renewable and green energy source is also the reason that business do not find it attractive. However, it is to be seen will the government be able to find any investor as in Air India.
BPCL is one of the major disinvestment plans. Without BPCL disinvestment, government can’t meet its target of 65,000 crore for 2023. While carrying out disinvestment in FY23 is itself a difficult task.
Pawan Hans on hold:
Government which is trying to sell Pawan Hans from 2016 has finalized deal with Star9 Mobility. On 29 April, government approved selling 51% stake for 211 crores, but it was put on hold over the NCLT’s ruling. Just 9 days before finalizing the deal, NCLT had passed an order against Almas Global Opportunity Fund (owns 49% of the Star9 Mobility) saying that the entity was in “knowing and wilful contravention of the approved resolution plan”. Now the government is studying the case and put the deal on hold.
CEL on hold:
Government in November approves 100% sale of stake in CEL. This was later the employee union and opposition alleged undervaluation of the company. The employees went to court and deal was put on hold. Similarly, CONCOR’S disinvestment plan was also put on hold over valuation and legal hurdles. Opposition has been alleging why so rush to sell PSU’s when government’s revenue is booming? Why sell strategic and profit-making PSU’s. CEL which create high end electronic equipment for defence and space sector was sold to minor financing firm Nandal Finance and leasing company which has no
experience in this sector. Congress spokesperson Vallabh Pant questions selling of Pawan Hans despite the role it played in off-shore operations, connecting inaccessible areas, charter services, search and rescue work, VIP transportation, corporate and special charters, hotline washing of insulators and heli-pilgrimages.
Anyways, it will be challenging for the government to meet’s its target for FY23. Several legal hurdles are on way. Opposition is also opposing the current disinvestment spree. It will be interesting to see how government can achieve its target for this year despite macroeconomic uncertainty. Also, it is do be seen how government will be positioning its assets to the investors. One of the major goals for disinvestments was to reduce fiscal deficit and fund National Infrastructure Pipeline. It will be challenging for the government to fund NIP if these targets are not met.