Government Raises ₹20,000 Crore through OFS in FY27, Achieves Four-Year High in Disinvestment Proceeds
Disinvestment proceeds in the current fiscal year (FY27) have reached a four-year high in just over three months, with the government mopping up over ₹20,000 crore through ‘offer for sale through stock exchanges’ (OFS) mechanism.
Government Raises ₹20,000 Crore through OFS in FY27
The government completed seven OFS, including Central Bank of India, Coal India, NHPC, NLC, GIC, IRFC, and Cochin Shipyard, with proceeds of over ₹2,200 crore, ₹5,500 crore, ₹4,300 crore, ₹1,200 crore, ₹3,000 crore, ₹2,000 crore, and ₹1,700 crore, respectively.
OFS is a mechanism that allows promoters or major shareholders of a listed company to sell their shares to the public through the stock exchange platform, requiring less documentation and being faster than IPO or FPO.
Strong Pipeline of OFS in FY27
Although the government has not disclosed the number of OFS planned for FY27, indications suggest a strong pipeline including big ones such as Life Insurance Corporation of India (LIC) and some Public Sector Banks and Financial Institutions.
There is also a possibility of getting CPSEs such as Export Credit Guarantee Corporation (ECGC) and India Infrastructure Finance Company Ltd (IIFCL) listed on bourses.
Market Impact and Details
- The value of government shareholding in 68 CPSEs listed on stock exchanges is over ₹22.80 lakh crore.
- The value of government shareholding in 16 public financial institutions (banks and insurance companies) is around ₹19 lakh crore.
- These data give enough headroom for the government to go for minority stake sale and earn a significant amount of money.
The government needs to bring down its stake in many companies to achieve the norm of Minimum Public Shareholding of 25 per cent in various CPSEs and public financial institutions, necessitating further OFS of CPSEs during the current fiscal year.
Key Takeaways
- Disinvestment proceeds in FY27 have reached a four-year high in just over three months.
- The government mopped up over ₹20,000 crore through OFS mechanism.
- There is a strong pipeline of OFS in FY27, including big ones such as LIC and some Public Sector Banks and Financial Institutions.
FAQs
What is OFS?
OFS is a mechanism that allows promoters or major shareholders of a listed company to sell their shares to the public through the stock exchange platform.
What is the significance of disinvestment proceeds in FY27?
Disinvestment proceeds are crucial for the government to earn a significant amount of money, especially when receipts from taxes are expected to be lower, and revenue expenditure is expected to shoot up mainly on account of West Asia war.
What is the Minimum Public Shareholding norm?
The Minimum Public Shareholding norm is 25 per cent in various CPSEs and public financial institutions, which the government needs to achieve by bringing down its stake in many companies.
Conclusion
Disinvestment proceeds in FY27 have reached a four-year high, with the government mopping up over ₹20,000 crore through OFS mechanism. With a strong pipeline of OFS and a need to achieve the Minimum Public Shareholding norm, the government has enough headroom to go for minority stake sale and earn a significant amount of money. The government should consider listing CPSEs such as ECGC and IIFCL on bourses to maximize disinvestment proceeds and achieve its fiscal targets.
