'Can't chase a sacrosanct number on divestment,' says Dipam Secretary Tuhin Kanta Pandey
Tuhin Kanta Pandey, Secretary in the Department of Investment and Public Asset Management (Dipam), plays a key role in helping the exchequer raise revenue every year. But, in an interview to Business Today, he explains that the role of Dipam is not about meeting targets by putting central public sector enterprises (CPSE) on the block. The department, says Pandey, strikes a fine balance between a calibrated nuanced disinvestment strategy and a consistent dividend policy, which also takes care of growth needs of the CPSEs. Edited excerpts:
Are you happy with the pace of disinvestment and the returns that the government has received?
Dipam handles both disinvestment as well as dividend. In many cases, they are interlinked and the government is dependent on both for fiscal receipts. When we do a share sale or disinvestment, we forego the revenues from the dividends going forward. If we look at our disinvestment policy, it has got two pillars. The first pillar of disinvestment is minority stake sale, which includes IPO, FPO, OFS and buybacks. In an IPO, we take an unlisted company to the market with the intent to not only raise receipts but also to improve corporate governance and accountability. The other pillar, which was opened in 2016 after a long period, is privatisation, which is a much deeper reform. From 2014, we have got about Rs 4.17 lakh crore in a matter of nine years as disinvestment receipts.
Over the years, the kind of opposition one used to see towards disinvestment has come down. Do you agree? What are the reasons for this change?
We have offered shares to employees in minority stake sales. The basic resistance from employees comes when we talk of privatisation and transfer of management control. But some of the privatisation done prior to 2004 and subsequently, such as Air India and Neelachal Ispat [Nigam], has not impacted employees adversely. In the case of Air India, several transformative steps have been taken and the growth of the enterprise has been opened. Similarly in Neelachal Ispat, the employees could not even be paid their salaries. It had about Rs 350 crore of dues pending, and the plant was closed for two years. It has all been reversed within a year since we divested it in July 2022... Everyone has gained—employees have gained, the banks have gained—it’s a win-win for everyone. There may be apprehensions [about privatisation] but we can ease them through talks. In the last few years, we have been able to convince the courts, and courts have generally ruled that they don’t want to interfere in disinvestment policy, because that’s the stance of the Supreme Court since the Balco case [in 2001]. Running a business is not an essential sovereign function of the government.
What is your strategy for disinvestments in FY24 given that elections are coming and there is expectation of a slowdown in stake sales?
Right now, we are concentrating on ongoing transactions. Much will depend upon the completion of these transactions, which is dependent on the bidders and the time taken for due diligence. Although we have a number on disinvestments, chasing it as a sacrosanct number will be difficult because markets also change.
Do you expect FY24’s Budgeted target for disinvestment to be revised?
Normally, the relook of the disinvestment target is at the stage of preparing the Revised Estimates. The current trend will depend upon which transactions get concluded. If some of the big transactions get concluded, one may get the full money.
There is speculation that the privatisation of IDBI Bank may get delayed beyond this fiscal. Is that correct?
No, the IDBI Bank disinvestment is well under process. We can’t react to speculative reports every time they come. Transactions where there is transfer of management control are longish transactions. They undergo a lot of due diligence by both us as well as the bidders.
Is a further stake sale in Life Insurance Corporation of India on the cards?
No, we are not looking at an LIC FPO in the immediate future. We have sold 3.5 per cent stake and LIC has a very large market cap. Therefore, there is no possibility of offloading 5-10 per cent of stake to the public in two years. [The government had in January exempted public sector entities from the minimum public shareholding norm that mandates 25 per cent public float for all listed firms.] At the moment, our effort is that LIC is fully engaged with its process of transformation and is trying to do several things on product mix, digitisation, earnings and so on. Several of these are being done so that LIC can demonstrate through its quarterly performance that what it had said in the red herring prospectus is happening and the market also gets a sense of it... So, we aren’t interested in an FPO at this stage, especially when we are concerned that the stock price has been less than what we thought it will be after listing. There has to be an adequate understanding about LIC among a wider set of investors and once that happens, it can move. We do not want to create another round of uncertainty in LIC for now.
As Dipam Secretary, how difficult is it for you to keep monitoring these different transactions and keep the ball rolling?
I think that’s our job. Let me give you an example. If you just take the last three years’ average, the BSE Sensex rose by 73.49 per cent, as on August 9, 2023, and the BSE CPSE index rose by 107.76 per cent… If you take the last two years, the BSE Sensex rose by 21.59 per cent and the BSE CPSE index rose by 45.92 per cent. In the past one year, the BSE Sensex is up 12.14 per cent, while the BSE CPSE index is up 32.68 per cent. There was a point when the CPSE index was lagging the BSE Sensex but we have managed to reverse it. This means that shareholders in CPSEs are getting rewarded by the market and not being punished. This is an important issue. We need to look at the performance of CPSEs because if shareholders are not getting rewarded, who will want to invest in stake sales? We also need to communicate this to the market and ensure that there is a calibrated policy for disinvestment so that there is no oversupply.
@surabhi_prasad
