The government has initiated the process for two more merger and acquisitions (M&As) in the energy sector. This will be the next round of action for the government after the high-profile merger of Hindustan Petroleum with ONGC last year.
“The GoI (Government of India) proposes to engage one Advisor from reputed professional consulting firms/ investment bankers/ merchant bankers/ financial institutions/ banks, for facilitating/assisting DIPAM in the process of (up to) two merger and acquisitions in the energy sector, till completion of the transactions, unless called off by GoI,” a request for proposal issued by the Department of Investment and Public Asset Management (DIPAM), said.
Though the RFP did not mention the name of any company to be merged or acquired, it is believed that the move is aimed at companies in the power sector. Sources said that NTPC wrote to the Centre expressing interest in SJVNL (earlier known as Satluj Jal Vidyut Nigam Limited). However, the Government of Himachal Pradesh is not willing to sell its stake in SJVNL.
SJVNL was incorporated as a joint venture between the Government of India and the Government of Himachal Pradesh. It is now a listed company with 63.79 per cent shares held by the Government of India, 26.85 per cent by the Government of Himachal Pradesh, and the remaining 9.37 per cent by the public. The present paid-up capital and authorised capital of SJVNL are ₹3,929.80 crore and ₹7,000 crore, respectively. The present net worth is ₹10,694.71 crore.
There are also reports that Power Finance Corporation and Rural Electrification Corporation could be merged but both the companies have been silent on the matter. Even, the government has not commented on the issue.
M&As among CPSEs were proposed after Finance Minister Arun Jaitley, in his budget speech of 2017-18, talked of strengthening the Central Public Sector Enterprises (CPSEs) through “consolidation, mergers and acquisitions.” Pursuant to the announcement, a vertical integration of ONGC and HPCL was completed during the last fiscal, which resulted in the government pocketing ₹36,915 crore.
Fresh M&As are critical for the government to meet its disinvestment target of ₹80,000 crore. So far, it has managed to get over ₹10,000 crore. Now, with just five months left for the current fiscal to come to a close, the government is aiming to fast-track the sell-off process through various means. Since many of the PSUs in the energy sector have reasonable cash reserves, one of the options is to resort to M&As.