MISSING DIVESTMENT TARGET – KEEPING THE TRADITION ALIVE!

By Ruma Dubey

It’s like a track record. The Govt just cannot seem to get divestment target ever right and this is a historic occurrence; not just about this Govt or the previous. Somehow, we simply do not know to set the right number – it is always much, much more than what is actually achieved. In the 25 years of divestment, the Govt has exceeded its target only four times – 1994, 1998, 2003 and 2004.

The Govt every year sets itself such outrageous targets; its like as though it learns nothing from so many years of mistakes.

In FY15, it is was Arun Jaitley’s maiden budget and he was indeed way over his head to super achieve and riding high on the election victory. He set himself the target of Rs.43,425 crore and as per data available on the DIPAM or Department of Investment and Public Asset Management website, it could garner only Rs.22,609 crore, a deficit of 48%.

Then in FY16, Jaitley upped the target to Rs.69,500 crore which really made everyone wonder about the sanctity of this target. Knowing a couple of months before end of the fiscal that it would not be able to come anywhere close to achieving it, Jaitley brought down the target to Rs.30,000 crore and even this was not enough. Despite the downward revision of the target, the Govt achieved only Rs.19,659 crore – 72% below original target and 35% below the revised target. The bottomline – it missed the targets.

Not learning from the previous experiences, for FY17, Jaitley set the divestment target at Rs.56,500 crore, as per data on DIPM, it has achieved Rs.39369 crore – a deficit of 30%.

As though Jaitley cannot see the widening gap between the targets and actual achievements, for FY18, the target has been set at a record high at Rs.72.500 crore. This is being optimistic with no heed to logic.

The FM hopes to achieve this by divesting stake in three of its Railway mulch cows – IRCTC, IRFC and IRCON. The Niti Aayig has recommended strategic sale in 12 PSUs – most making losses even at operating levels – national Textile Corp., FACT, Hindustan Antibiotics, Scooters India, Hindustan Fluorocarbons. The Cabinet in September’16 gave its approval to sell stake in Bharat Pumps and Compressors - the first PSU to be put up for strategic sale by the Narendra Modi government.

The government also intends to initiate share sale in Hindustan Aeronautics, Airport Authority of India and Housing and Urban Development Corporation (Hudco).

The first PSU divestment for FY18 could be from Cochin Shipyard as it filed the DRHP with SEBI last week. It aims to raise Rs.1500 crore.

Ideally, given the optimism around the Govt at the moment, achieving this target should not be tough. But then we do not live in an ideal world. Past track record of PSU divestments have been dismal with the Govt missing the target for five consecutive years. One can say that things have changed– energized Govt, optimism, strong markets and new appetite for PSU stocks. If the OFSs are priced right and marketed right, maybe we might end up saying that after years and years of missing targets, the PSU divestment target was finally met this fiscal.

And we are hoping that issues ‘really’ get subscribed and not by calling in the regular knight in shining armor – LIC. The insurance behemoth has time and again bailed out poorly managed PSU OFS’s and despite that, targets have been missed. Let’s see if in FY18, the optimism on the trading floors and with investors across India for the Modi Govt, translates into subscription for these PSU OFSs. Or else, we can say that optimism was just on the surface; deep underneath, the same unease and uncertainty remains.