New Delhi: Given the recent decline in equity indices, the government may look at merger of public sector units to meet its divestment target for 2018-19, a senior finance ministry official said. “The market condition is not conducive for coming out with initial public offering and offer for sale of PSUs. We are witnessing lack of liquidity in the system which is impacting the equity market also,” the official said.
The official said the last initial public offering that the government came out with, of Garden Reach Shipbuilders & Engineers, did not get an encouraging response. The state-owned shipbuilder’s offer got an extremely tepid response from investors, forcing the company to extend the subscription window by three days. The offer was subscribed 102 per cent, largely due to subscriptions from domestic institutional investors, including mutual funds.
“The offering was our weakest that came out at a difficult time, however, that has made us reconsider our IPO plans for other PSUs,” the official said. The government is considering some merger proposals, including that of Power Finance Corp, and Rural Electrification Corp, and NTPC with NHPC. “We are already looking at certain merger possibilities that may be viable this year, including the proposal to sell stake in Power Finance Corp to Rural Electrification Corp,” the official added.
As on June 30, the government held 65.61 per cent stake in PFC. The official said the government may raise Rs 10,000-12,000 crore from the proposed stake sale in PFC. The government had used a similar mechanism for the merger of Hindustan Petroleum Corp with Oil and Natural Gas Corp, with the latter buying the government’s 51.1 per cent stake in HPCL for Rs 36,900 crore in 2017-18.
REC finances and promotes rural electrification projects across India.
PFC, which is under the administrative control of the Ministry of Power, is a non-banking financial company in the power sector.
The Department of Investment and Public Asset Management is also likely to soon invite bids from merchant bankers and legal advisors for handling merger or acquisition deals of state-owned units, the official said.
According to reports, the government is also looking at the proposal to merge NTPC and NHPC. The official said though the list of PSUs that may be merged has not been finalised yet, the department is keeping the process ready so that as and when a formal proposal is received from the administrative ministry, the merger process can be initiated. During 2018-19, the government had also planned for initial public offerings of Mazagon Dock Shipbuilders, Rail Vikas Nigam, Indian Railway Finance Corp, and IRCON International.
