This document summarizes information about disinvestment policies. It defines disinvestment as an organization or government selling or liquidating an asset or subsidiary. The objectives of disinvestment are to reduce financial burden on the government, improve public finances, introduce competition, and increase firm growth. Reasons for disinvestment include meeting fiscal deficits, expanding or diversifying firms, repaying government debts, and implementing government plans. India introduced disinvestment policies after new economic policies in 1991 to reduce the burden of financing public sector undertakings.

1. Disinvestment policy
Presented by
Jagadeesh.T
(12na1e0008)

2. Introduction
Investment and disinvestment are two sides of the
same coin. Investment refers to conversion of
money or cash into securities, debentures, bonds
or any other claims on money. At the same time,
disinvestment invloves the conversion of money
claims or securities into money or cash.

3. Definition
“The action of an organisation or government
selling or liquidating an asset or subsidiary”is
called disinvestment

4. Objectives of disinvestment
 To reduce the financial burden on government
 To improve public finances
 To introduce, competition and market discipline
 To increase growth of the firm
 To encourage wider share of ownership

5. Reasons for disinvestment
 To meet fiscal deficit
 Expantion or diversification of the firm
 To repayment of government debts
 Implementation of government plan
 PSU's give negative rate of return on capital

6. Overview of India's disinvestment
 Disinvestment policies introduce after new
economic policy in july – 1991
 The disinvestment policy as an active tool to
reduce the burden to financing the PSU
 NIF (National investment fund)
 Government has a borrowing plan of 4,00,000cr
roughly 2,45,000 cr would raised through
OMO

7. The Pay-Back Period (PBP)
The payback period for a project is the length of time it
take to get your initial investment back. It is the time
from the initial cash outflow to the time when the
project’s cash inflows add up to the initial cash outflow.
Example: if the initial investment is $100,000 and the
project’s CF stream is as follows, PBP = _____
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Date t=1 t=2 t=3 t=4 T=5
CF 30,000 42,000 42,000 28,000 12,000
ACC. CF

8. FORMULAE:
 Payback period
 = Original investment ÷ Annual cash flows

9. The Pay-Back Period (PBP) rule
Firms usually specify an arbitrary number of periods (t)
as the maximum time-to-payback. The PBP decision rule
is:
If PBP < t  Accept project
If PBP = t  Indifference
If PBP > t  Reject project
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10. Conclusion

11. Thank y ou