Strategic sales will be key to achieve divestment target: Tuhin Pandey

We are hopeful of completing the transaction for Numaligarh Refinery by this fiscal, says Tuhin Kanta Pandey, Secretary, DIPAM (Department of Investment and Public Asset Management).

This refinery, which is part of Bharat Petroleum Corporation Ltd (BPCL), is to be hived off separately and sold to a public sector company.

Talking to BusinessLine, Pandey also made it clear that there will not be much reliance on equity-based exchange traded fund (ETF). Excerpts :

A major reliance would be on strategic sales because only those kind of sales give you the kind of money that will help you achieve this ambitious target. The target will be achieved if we are able to conclude some of the big ticket disinvestments such as Air India, BPCL, SCI and Concor. We may have to conclude them during the next fiscal. The proposals for strategic sales keep coming. Once the NITI Aayog identifies the PSU, we sit with them and then the proposal goes to the CCEA. So, more strategic sales will happen.

The CCEA’s direction is that if you follow SEBI’s guidelines, everyone must come out with an IPO. A lot of IPOs have come out in the last 3-4 years and now there will IRFC’s IPO, which is a very large organisation. But there are not many CPSEs that can garner huge sums of money through IPOs.

Companies also need to continuously do well in this business as competition is high. An insurance company must focus on its bottomline as there are many private companies that are chipping into share of public sector insurance companies.

So sometimes in the insurance business if a company’s profitability is hit then it is not in a position to offer dividends.

Once a company is listed, its balance sheet and quarterly results are analysed by investors, research firms and others. If they feel that the company’s prospects are bleak then its share value goes down. So all the financial indicators of a company have to perform well.

During a company’s listing its historical performance is taken into account, but post listing, it is the current performance that matters.

CPSEs’ managements have to improve communication. I think those managements which are communicating well with the market, are performing better with the same level of performance. In the coming year also, we will advise companies to improve their communication with investors. They should keep sharing news about their companies with the investors in a more transparent way. This will lend more clarity to the investors.

We just had ETF on January 30-31, and now the market is down after the Budget though it is recovering a bit, we need to be mindful of the investors’ interest particularly those who invest for little the long term through ETFs. I don’t think we can rely frequently on ETFs, so we will be probably use this instrument less.

There are two parts to asset monetisation — core and non-core. Under core, the assets are huge and form a very important part of the company’s business. However, there is a possibility to increase the leverage based on that. If a company does not have a high debt level, it can raise resources by monetising the assets through various methods such as infrastructure investment trusts (InvITs) or in a NHA-like situation a company can bundle the road and offer it to raise the money upfront and that money can be used for building more roads. This kind of asset monetisation is increasingly being used by CPSEs now. Both PowerGrid and NHAI can go for this option. These are being monitored by the NITI Aayog.

Under non-core, some of the assets of a company may be surplus to its requirements. Take Air India’s example, it is selling some assets which are not part of the disinvestment transaction, because we think these can be sold separately.

DIPAM can help a company monetise such assets and for that we have put in place a framework where international property consultants can advise a company on structuring those transactions to help maximise value.

Take the example of MTNL-BSNL merger. There is a package which requires some assets to be sold by MTNL and BSNL and there DIPAM is helping them out. Please remember DIPAM handles non-core asset monetisation. Also all the money may not come to the government, it could accrue to the company

It will be completed by March end. The process of Numaligarh refinery’s sale is on and hopefully, it should be completed by March-end.