“Though it is unlikely that the government would divest up to 51 percent in all listed PSUs, the value that can be unlocked from a well planned secondary public offering is huge,” said SMC Capitals equity head Jagannadham Thunuguntla.

1. Divestment can raise $95 bn, wipe deficit clean: Study
8 Jun 2009, 1920 hrs IST, IANS
New Delhi, June 8 (IANS) Divestment of even minority stake in state-owned firms can raise nearly $95
billion (Rs.450,309 crore), help clean the red ink on the government’s balance sheet and make
enough room for another fiscal stimulus, said an independent study released Monday.
The study by Delhi-based brokerage firm SMC Capitals said as much as $94.77 billion can be raised
from the sale of equity in state-run firms even if the government retains 51 percent controlling stake.
“The current fiscal deficit is at $62.26 billion, that is about 6.23 percent of the GDP, much lower than
the amount that the government has the potential to garner by selling the stakes up to 51 percent in
the listed PSUs only,” the study said.
“Though it is unlikely that the government would divest up to 51 percent in all listed PSUs, the value
that can be unlocked from a well planned secondary public offering is huge,” said SMC Capitals
equity head Jagannadham Thunuguntla.
Back-of-the-envelope calculations throw up these figures: If the government were to divest 47.38
percent of its holdings in National Mineral Development Corp (NMDC), it would rake in about
Rs.81,263 crore.
Similarly, MMTC (formerly Minerals and Metals Trading Corp) would fetch Rs.75,149 crore by selling
48.33 percent to the public.
ONGC, one of the largest PSUs by market capitalisation (Rs.249,778 crore) would add Rs.57,799 crore
to the government’s coffers by offloading 23.14 percent.
Theoretically, SMC said, if the government brought down its holding to 51 percent in 45 listed PSUs,
its coffers would swell by Rs.446,156 crore, enough to wipe off the Rs.330,000-crore fiscal deficit and
leave it with about Rs.116,156 crore to spend.
However, it said, the government in all probability would look at maximising the returns by diluting as
little as possible to protect the interests of sensitive sectors like banking.
“By tinkering with the structures and diluting as low a stake as possible, the government would want
to garner as much funds as it can,” said Thunuguntla.

2. “If we add the divestment sale to the funds that can be generated through fresh IPOs of PSUs like
NHPC, OIL and BSNL, almost Rs.150,000 crore can be generated.”