PSU divestment can raise Rs446,156 crore, wipe out deficit: study

The government can raise around $95 billion (Rs446,156 crore) by divesting even a minority stake in state-owned firms, raising enough funds to wipe out the fiscal deficit, according to an independent study.

The study by Delhi-based brokerage firm SMC Capitals, released today, said a 49 per cent sale of equity in 45 state-run firms can raise as much as $94.77 billion even as the the government retains 51 per cent controlling stake in the PSUs.

If the government brought down its holding to 51 per cent in the 45 listed PSUs, its could fetch Rs446,156 crore, enough to wipe out the Rs330,000-crore fiscal deficit and leave it with a Rs116,156 crore surplus, SMC Capital said in the study.

"The current fiscal deficit is at $62.26 billion, that is about 6.23 per cent of the GDP, much lower than the amount that the government has the potential to garner by selling the stakes up to 51 per cent in the listed PSUs only," the study said.

"Though it is unlikely that the government would divest up to 51 per cent 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.

The study said if the government were to divest 47.38 per cent of its holdings in National Mineral Development Corp (NMDC), it would rake in about Rs81,263 crore.

Similarly, MMTC would fetch Rs75,149 crore by selling 48.33 per cent to the public.

Offloading 23.14 per cent in ONGC, which has a market capitalisation of Rs249,778 and is one of the largest PSUs, could add Rs57,799 crore to the government's kitty, the study said.

SMC, however, said it expects the government to look at maximising returns by diluting as little as possible.