Budget 2024: PSU stake sale likely post Lok Sabha elections, expect a moderate divestment target for FY25

Given that the disinvestment target for FY24 is likely to be missed by a wide margin-- marketmen and economists sees it at Rs 20,000 crore against a target of Rs 51,000 crore, there are chances that the Finance Minister Nirmala Sitharaman may announce a moderate target for FY25. Brokerages such as Elara Nomura India and Elara Securities are expecting a modest disinvestment target Rs 40,000 crore, which would be 0.1 per cent of GDP, compared with "the overly ambitious target" for this year.

The companies where offer for sale (OFS) was successfully completed this financial year so far have been Coal India, Rail Vikas Nigam Ltd, SJVN Ltd, IRCON International Ltd and IREDA Ltd. The offer for sale for NHPC Ltd has been announced. Brokerages such as Jefferies believe disinvestments may also a boost post elections, partly as the government capitalises on the sharp run in PSU stocks in sectors such as railways, defence etc.

"Assuming that the government would be able to push through sales of other PSUs in the remaining part of the year, we anticipate no more than Rs 20,000 crore worth of disinvestment proceeds for the government this financial year," Elara Securities said. This brokerage sees disinvestment target of Rs 40,000 crore for FY25.

PhilipCapital said since strategic disinvestment would likely be more successful post general elections, it is assuming Rs 50,000 crore in divestments for FY25. This brokerage is expecting disinvestments for FY24 to come in a Rs 20,000 crore.

Vivek Goel, Joint Managing Director at Tailwind Financial Services even thinks the disinvestment announcements may be deferred until the post-election budget.

As per DIPAM's portal, disinvestment receipts as of January 31 stood at Rs 12,504.32 crore, which was 24.5 per cent of the FY24 budget estimate of Rs 51,000 crore.

"Receipts from divestments face the highest risk of a miss in FY24, with less than a fifth of the Rs 51,000 crore having been collected through minority stake sales. New big-ticket proceeds in the rest of the year are unlikely as two-three of prospective asset sales face procedural and administrative delays," said Radhika Rao, Executive Director and Senior Economist, DBS Group Research.

Sonal Badhan, Economist at BOB Capital Markets said statement by officials suggest that sale of IDBI is not expected to be completed in the current fiscal year. In the coming months focus will be on small ticket size receipts, she said. "We thus expect a shortfall of around Rs 20,000-30,000 crore this year. In FY25, as market conditions are expected to be slightly more supportive, this may in turn enhance government’s ability to attract buyers and allow receipts in the range of Rs 50-55,000 crore bracket," she said.

At present, the EoIs have been closed for the Shipping Corporation of India Ltd, FSNL, BEML Ltd, Pawan Hans Ltd, HLL Lifecare, NMDC Steel, IDBI Bank Ltd and Projects and Development India Ltd.

"The disinvestment process for major CPSEs such as IDBI Bank and Shipping Corporation is expected to only pick up in FY2025," ICRA said. Overall, ICRA anticipates a large shortfall of Rs 36,000 crore in the disinvestment target.

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