CPSE stake sale: Ministries wary of foreign investors

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NEW DELHI: The government’s strategic sale plan could face headwinds with some administrative ministries insisting on stringent conditions on foreign investment for the sale of state-run companies under their watch.

In some cases, the administrative ministries insist that strategic equity stakes must not be sold to foreign investors, including institutional investors, said two government officials aware of the deliberations.

In others, they want a cooling-off period of a few years after a strategic sale before allowing foreign investment. Companies identified for strategic sales include Pawan Hans Ltd., BEML, Dredging Corporation of India Ltd. and Bharat Pumps & Compressors Ltd.

​“In some strategic sectors, the conditions also include that no foreign company can be brought in as stakeholder for the next five years,” said one official who did not wish to be identified. Not all companies put up for strategic sale have similar stringent conditions.

“It is case-specific and only for CPSEs operating in sensitive sectors. These issues are still being discussed,” the official said. The government’s attempt to reduce its stake in IDBI Bank to below 50% and give it a private sector character has been delayed by issues of valuation and the large real estate the bank holds.

A disinvestment target of Rs 72,500 crore has been set for the next financial year, of which Rs 15,000 crore is expected from strategic sales. The target through such stake sales in the current financial year was budgeted at Rs 28,000 crore, although the government hasn’t been able to move forward on this.

Another government official said that such norms may throw a spanner in the works, especially in the outright sale of companies in which foreign participants may be willing to buy stakes. 1% in Dredging Corporation. The

“They should also consider that banks in India are grappling with bad loans and will not be able to finance Indian promoters, who are already having problems servicing their debt,” said Prithvi Haldea, chairman of Prime Database.

At a recent meeting between officials of the finance ministry and those from other administrative ministries, it was decided to set up a disinvestment cell within central public sector enterprises and their respective administrative ministries to fast-track the process.

The government intends to sell its entire 51% stake in Pawan Hans, 26% stake in BEML and more than 51% in Dredging Corporation. The government will completely exit from Bridge & Roof Company and Hindustan Fluorocarbons.