The potential kitty from disinvestment receipts, if the government decides to bring down the stake in all public sector enterprises (PSEs), public sector banks (PSBs), other financial institutions (FIs) to 51 per cent would be at about ₹3.5-lakh crore, according to an assessment by Bank of Baroda’s economic research department.

Of this, ₹1.7-lakh crore can come from PSEs and ₹1.8-lakh crore from financial institutions, per a note by Sonal Badhan, Economist, BoB.

However, as the stake of the government comes down, there would also be lower dividend inflows from these enterprises, she said.

Currently, dividend earned from all PSEs (bank and non-bank) stands at ₹50,000 crore.

Market capitalisation

“At the present level of the Sensex, total market capitalisation of government holdings in these enterprises (PSEs and FIs) is around ₹17-lakh crore.

“Bringing down the stake to 51 per cent across the board would be releasing around ₹3.5-lakh crore. This implies that the dividend yield stands at around 3 per cent,” Badhan said.

For the hypothetical exercise to determine what can be the potential size of disinvestment receipts if government was to divest its stake in all PSEs, PSBs and insurance companies up to 49 per cent (thus retaining control with 51 per cent shareholding), the market capitalisation along with the current shareholding of the government has been based on the closing price of 8 March, 2023, as specified on the Department of Investment and Public Asset Management (DIPAM) website.

The BoB economist observed that amongst the 53 PSEs under the ambit of the Central government which are listed, maximum dilution (above 35 per cent) is possible in 10 companies — KIOC, Scooters India, HMT, ITI, ST trading corporation, Fertilizers and chemicals Travancore, MMTC, Andrew Yule and Company , ITDC and SJVN. However, the revenue earned from these will be limited (₹24,929 crore) as their current market capitalisation is low, per the note.

On the other hand, maximum revenue potential (based on current M-cap) exists from dilution in companies, such as Hindustan Aeronautics Ltd, Coal India, ONGC and Indian Railways Finance Corporation which can potentially raise around ₹75,000 crore.

Disinvestment in FY23

So far in FYTD23, government has collected ₹31,106 crore in disinvestment receipts and a bulk of it came from LIC’s initial public offer  (₹20,516 crore).

The balance was covered by “offer for sale” (OFS) method used for ONGC (₹3,059 crore), IRCTC (₹2,724 crore), and PPL (₹472 crore); sale of Axis Bank shares held by SUUTI (₹3,839 crore); sale of enemy shares (₹0.24 crore), and GAIL’s buyback of shares (₹498 crore).

“Thus it seems likely that government may miss the revised target (of ₹50,000 crore against initial budgetary target of ₹65,000 crore). For FY24, the target has been set at ₹51,000 crore,” Badhan said.