The government may retain non-controlling stake in some of the public sector enterprises that would be put for strategic sale involving change of management control next year.
Highly placed government sources said that a bare minimum government presence may be maintained in sectors such as defence, railways and infrastructure so that necessary hand holding is provided to the new management in the initial years of operation.
Also, the bare minimum presence would also provide the government with additional revenue opportunity to exit the entity after its expansion and growth that enhances the valuation of shares.
More than a dozen companies would be lined up for privatisation in FY22. Depending on the market conditions and the size of the share sale with transfer of management control, the government will decide either to sell its entire stake or retain a portion of it for sale later.
Speaking to IANS earlier, disinvestment secretary Tuhin Kanta Pandey had said that the government is going into a difficult area of ceding control of PSEs under the privatisation policy but would not completely exit from certain companies that would require some hand holding.
Already in proposed disinvestment of state-run defence and construction equipment manufacturer BEML Ltd., the government is offloading only 26 per cent its 54.03 per cent stake in the company while ceding management control. It will have the option to offload the balance 28 per cent equity at a later stage.
Similarly in the strategic sale of Container Corporation of India (Concor), government will offload 30 per cent of its equity while retaining about 25 per cent stake for sale later at higher valuation.
“This is a good exercise where the government is willing to cede control in PSEs while not completely exiting the entities, especially in sectors where private sector would require a lot of hand holding as they would be operating in areas where state has substantial presence or where dealings with state agencies with be higher,” said an expert from one the big four global consulting houses asking not to be named.
While the government has identified defence and railways where it would retain minority interest under the strategic disinvestment strategy, more such sectors would be selected as and when their privatisation roadmap is finalised. These could be companies where selling large chunk of government shares would mean much larger investment by the private sector.
Given the current market conditions where the Covid pandemic has disrupted businesses, a call would be taken that transfer of management control would go through even with lower stake sale. The residual share could be sold later giving first right of refusal to the strategic buyer.
The exercise to retain minority shareholding in privatised PSEs has been tried earlier as well. In the strategic disinvestment of Bharat Aluminium Co (Balco) and Hindustan Zinc Ltd (HZL) during Vajpayee government’s time, centre sold majority shareholding with management control but retained minority shareholding. Centre continues to hold 29.59 per cent stake in HZL till date. In Balco government sold 51 per cent stake in 2001 while retained its holding at 49 per cent.
(Subhash Narayan can be contacted at firstname.lastname@example.org)