Union Budget 2023: FY24 divestment target to be realistic; eyes on IDBI Bank, Concor, IREDA, WAPCOS stake sales

Union Budget 2023 is just hours away and the market is closely awaiting the divestment target that the finance minister Nirmala Sitharaman may announce for FY24. The target set for FY23 is unlikely to be achieved by March, said analysts, even as India's largest ever IPO by LIC concluded this financial year. Analysts largely felt the FY24 divestment target could be a realistic one, but their divestment projections vary from Rs 50,000 crore to Rs 80,000 crore!

To recall, divestment target for FY23 is set at Rs 65,000 crore. But only Rs 31,106 crore divestments have been achieved thus far. They included Rs 20,516 crore proceeds from the LIC IPO, Rs 3,058 crore from ONGC's offer for sale, Rs 3,839 crore worth sale of Axis Bank shares held by SUUTI and Rs 2,723 crore from IRCTC's offer for sale.

Nirmal Bang Institutional Equities, which is factoring in a divestment target of Rs 50,000 crore for FY24 noted that the divestment secretary has hinted that the divestment target for FY24 may be more realistic.

"In FY23 so far, 43.7 per cent of the divestment target has been, met largely on account of LIC. Divestments in the pipeline for FY24 include IDBI Bank, Indian Renewable Energy Development Agency Ltd (IREDA), Export Credit  Guarantee Corporation (ECGC), Concor and WAPCOS." it said.

WAPCOS filed IPO papers with the government in September 2022.

Axis Securities expects FY23 Disinvestment receipt is expected to be lower than the budget estimate. It said based on the last couple of year’s track record, disinvestment estimates for FY24 is likely to be modest. The divestment target for the ongoing financial year is Rs 65000 crore. In FY22, the divestment target was set at Rs 1,75,000 crore which was later revised downward to Rs 78,000 crore. Divestments in FY21 and FY20 stood at Rs 37,897 crore and Rs 50,304 crore.

Despite the public listing of LIC, disinvestment proceeds for FY23 are expected to fall short of budget estimates at Rs 35,000 crore, said ICICIdirect. It expects a realistic disinvestment target in FY24 with several deals nearing closure.

"We estimate disinvestment target at Rs 80,000 crore for FY24, at 0.3 per cent of nominal GDP," the brokerage said.

PhillipCapital said it expects disinvestment target for FY24 on assumptions Concor stake sale goes through.

Emkay Global said divestment is likely to be kept at Rs 65,000 crore amid the strategic sale of core and non-core assets. That, it said, would still be ambitious, as there will likely be limited windfall gains from stake sales of the government’s large holdings, which are mainly concentrated in commodity companies and utilities. Other brokerages see a lower divestment target.

It noted that divestment proceeds for FY23 have been meager so far, at just Rs 28,400, which is 44 per cent of the Rs 65,000 crore target. It noted that the LIC IPO accounted for Rs 21,000 crore of the amount raised, highlighting the lack of progress on other divestment targets, with plans for BPCL having been shelved. Centre has also opted to wait for realising ‘upside value’ from IDBI Bank.

"We expect divestment to only amount to Rs 33,600 crore, falling below the budget estimate by 48 per cent (0.1 per cent of GDP),” Emkay Global said. HDFC Securities said divestment targets could be set lower.
 

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