Leading asset management companies shows interest in becoming advisors to government for disinvestment

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Leading asset management companies and merchant bankers have shown the interest in becoming advisors to the government in the divestment of 10 per cent stake in Mishra Dhatu Nigam (MIDHANI). Financial firms can be crudely split down the middle those on the ‘buy’ side and those on the ‘sell’ side. As asset management companies aim to grow a portfolio for their clients, their major role in making smart purchasing decisions that will raise the overall value of their clients’ funds.

SBI Capital Market, ICICI Securities Limited, IDBI Capital Markets & Securities Limited, Elara Capital India and SMC Capital have been called to make virtual presentations to the department of investment and public asset management (DIPAM) that is undertaking the stake sale on behalf of the government. The Centre intends to sell 10 per cent stake in the defence public sector enterprise via offer for sale (OFS) which is likely to fetch around Rs 400 crore. The government presently owns 74 per cent equity in the company. Midhani produces superalloys, titanium and titanium alloys, special steels, electrical and electronic alloys, and special products for aeronautics, space, nuclear, chemical, petrochemical, power generation and furnace applications.

The government has set a disinvestment target of Rs 2.10 lakh crore for FY 2020-21. From this, Rs 1.20 lakh crore will come from disinvestment of public sector undertakings and another Rs 90,000 crore from stake sale in financial institutions. A senior official had said that while strategic divestment of CPSEs including BPCL, Air India, Concor, Shipping Corporation of India may go slow due to the COVID 19 pandemic, the government may actively look at other ways of divestment including buybacks, offer for sale and exchange-traded funds (ETFs).

The government has garnered subscriptions worth Rs 11,000 crore for ‘AAA’ rated bonds of CPSEs through the second tranche of Bharat Bond ETF. It closed a 15 per cent stake sale in aerospace and defence company Hindustan Aeronautics (HAL) via offer for sale for Rs 5,000 crore. The OFS was fully subscribed. At the same time, it has sought bids from merchant bankers for selling part of its 87.40 per cent stake, again through OFS, in Indian Railway Catering and Tourism Corp (IRCTC) by September 10.