The Hindu Business Line : Earnings will accrue to Investment Fund in 2009

Fund source
NIF will again receive funds from the sale of Government stake in three public sector companies — IOC, NHPC and REC.
All three companies have already filed their draft red herring prospectus with the SEBI.

Ambarish Mukherjee

New Delhi, Dec. 25 The National Investment Fund (NIF), set up by the United Progressive Alliance (UPA) Government, is not expected to receive any earnings that could be invested in social sector schemes, as promised in the National Common Minimum Programme (NCMP), during the tenure of the present Government.

This is because the fund will start earning only by the second half of 2009. The corpus of around Rs 1,000 crore received by NIF through the sale of Government stake in Power Grid Corporation of India had been invested in three public sector mutual funds, namely, the SBI MF, LIC MF and UTI MF for a period of two years with an expected earning of 9 per cent per annum.

Disinvestment

The earnings will accrue to NIF only around August 2009, well after the tenure of the present Government is over, sources in the Department of Disinvestment told Business Line.

The Government had approved setting up the NIF in November 2005. According to the plans, proceeds from disinvestment of Government stake in public sector undertakings (PSUs) are to be canalised into the NIF. The NIF will invest this corpus further and 75 per cent of the earnings from such investment would be channelled into various social sector schemes and the remaining 25 per cent will be used for revival of sick PSUs, according to the NCMP.

Initial efforts to kick start the NIF with proceeds from sale of Government stake in Maruti Udyog did not materialise because when the UPA Government sold its 18.2 per cent stake in the automobile company in two phases to raise Rs 1,567 crore, Maruti was no longer a state-run company and thus the proceeds had to be diverted to the Consolidated Fund of India.

PSU IPOs

The NIF will again receive funds from the sale of Government stake in three public sector companies, namely IOC (Indian Oil Company), NHPC (National Hydroelectric Power Company) and the REC (Rural Electrification Corporation).

“Though all the three companies have already filed their draft red herring prospectus with the Securities and Exchange Board of India (SEBI), only the IOC IPO is expected before March end,” Government officials said.

At present, REC has an equity base of Rs 780 crore and the shares having a face value of Rs 10 each has a book value of Rs 53 each. In case of NHPC, the equity base is Rs 10,340 crore and the book value of each share stands at Rs 14.

“The NIF will receive the proceeds from the sale of stake in these companies only in next fiscal and so returns from investments of these funds are unlikely before fiscal 2009-10,” officials said.

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