The new Indian government is going to launch its long-awaited disinvestment plan worth 10 billion USD which will focus on state-owned companies. The sale is to start next month with the Steel Authority of India or Sail, India’s biggest steal conglomerate by volume. The next cabinet intends to market 5 percent of Sail’s value. India’s Prime Minister Narendra Modi, who was elected in May, aims to boost the country’s budget with similar sales. Officials deem the disinvestment plan a good and solid method to obtain more financial resources for the government budget although it starts with a rather modest disinvestment of Sail. If Oil and Natural Gas Corporation (ONGC) and Coal India were disinvested in a similar fashion, they could raise a much larger amount of money – as much as 5 billion USD. Sail chairman, Mr Verma, commented that the first disinvestment should be a successful one, which might explain why Prime Minister Modi opted for a smaller transaction at the beginning.
The sale of shares would decrease the government’s holdings of Sail from 80 to 75 percent, which follows the instructions of the market regulator regarding the amount of tradable shares in listed stocks. The company, moreover, confirmed that the new cabinet did not intend to perform any radical changes in terms of privatization of state companies as some analysts think. Sail itself has just begun a process of modernization of its plants and expansion of capacity. Generally, among the biggest obstacles of doing business in India’s steel industry is the lack of locally produced coking coal, which is why most firms in the business – including Sail – must seek suppliers from abroad.
