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Without disinvestment, there is no scope to reach 9% GDP growth rate

February 12, 2025, 1:30 am

The Modi 1.0 and Modi 2.0 governments have been tardy in the disinvestment of Public Sector Enterprises (PSE). The fear appears to be in losing the management control in PSE, apart from the noise by the opposition parties and even some of the NDA allies. It looks as if the government has not internalized the difference between disinvestment and strategic sale like many common men. The government does not lose management control when they disinvest small portions of the PSE shares through IPO (Initial Public Offering) or FPO (Further Public Offering), as long as the government at least 50% of the equity.
The successful effort on the strategic sale of Air India and the failed effort on the strategic sale of BPCL indicate that the government appears to think that either it should be a strategic sale of PSEs, where the government held slightly more than 50% stakes, or no disinvestment should be taken up. Even in the case of BPCL, had the government gone for the Offer For Sale (OFS) as a part of the FPO to the institutional investors, HNI investors, and retail investors, this strategic sale of BPCL would have succeeded, of course without the premium the private player would be willing to pay for the strategic sale.

The last major disinvestment by the central government was in LIC, where the government sold its 3.5% stake in FY 2022-23, and no major disinvestment was achieved after that. The table shows the tardy disinvestment targets and achievements by DIPAM since 2014-15.

The market capitalization of Central PSE, excluding PSB (Public Sector Banks) as of Jan 31, 2025, as per BSE data, is about INR 36 lakh crore. The Enterprise Value, or Embedded Value (EV), a more comprehensive valuation of PSE, must certainly be higher than the market capitalization and the EV is used for fixing the share price and the number of shares to be given for IPO or FPO. Even if the government aims for 10% disinvestment of PSE across the board every year for four years, it will fetch them at least 3.6 lakh crore in the first year and more in the subsequent years based on the then stock valuation. The government could spend the disinvested amount on creating and upgrading public infrastructure like railways, ports, airports, and roads in that order, as the infrastructure deficit still lingers on. The money invested in infrastructure has a force multiplier of 3, and the investment of INR 3.6 lakh crore will create an additional GDP of about INR 12 lakh crore, which will be about 3.7% of the GDP estimate of INR 324 lakh crore at current prices for FY 2024-25. There is a reason to believe that if 10% of the PSE stocks are disinvested every year for the next four years, the GDP growth rate will reach 9% – 10%.

Citing various parameters, people may argue that it is not right to disinvest PSEs. PSE is the family silver and cannot be mortgaged is one such reason. However, there is no force multiplier effect on family silver, whether it is held by the government or families. Moreover, when the home silver is invested in the right sectors, it will give higher returns than keeping it as a stored value. The economy will grow only when the locked investments are unlocked and put to correct use for the development of the nation. The central government has been getting good dividends from PSEs (INR 35,543 cr, INR 39,750 cr, INR 59,294 cr, and INR 36,851 cr in FY 2019-20, FY 2020-21, FY 2021-22, and FY 2022-23, respectively), and why should we disturb them is another point. The receipts from PSE dividends will not reduce much even if the PSE disinvests 10% of its EV. However, the receipts from the disinvestment will go to the Consolidated Fund of India, and the government can put this receipt to good use.

The third reason may be that this is not the right time, as the BSE Sensex, which surpassed 85,000 earlier, is now trading at 77,000. The contrary view is that if PSEs are disinvested from now onwards 10% each year, there will be a spur in the stock market, and it will generate positive signals for the business community and economy.
The fourth reason may be that this will promote the corporate sector at the cost of public sector enterprises. While disinvestment, the shares may be allotted up to 90% for retail and High Net worth Individuals (HNI) and 10% for the institutional investors. In this backdrop, the argument that disinvestment will divert PSE shares to the corporate sector does not hold water. There has been a new vigour in the share market among retail investors and NHI for investing directly in the IPO or FPO since 2021-22. The 18 crore demat account holders as of Jan 2025 mean a significant population of India is ready to venture into the stock market. This also shows that even those who earn moderate incomes, which will not entail income tax, have been investing in the stock market either directly or through mutual funds. Politically speaking, this 18-crore population forms a major chunk of supporters of the Modi dispensation. Their appetite for investing in the market cannot be met by the big firms or MSMEs or the firms that are going for the public with IPO. Indian households invest only about 5% in the stock market or mutual funds. Unless the government promotes people to invest more in the stock market by various measures, including partial disinvestment of PSE, the benefit of economic growth will not accrue to the middle class, which forms most of the demat account holders.

The share of disinvestment in the total receipts remains at less than 2.5% for the last four years. It should be increased to at least the double digits. The finance ministry has a separate department called DIPAM to carry out the disinvestment process. However, this department is sub-optimally used by the government. It is immaterial what the budget states about the disinvestment target. If the government mentions a higher target for disinvestment, it will be used by the opposition parties to target the government for divesting government units into private hands. The 2025-26 budget targeted only INR 47,000 cr as a disinvestment target, and one cannot find fault with this low ambitious target. The NITI Aayog has already done enough homework on the disinvestment of PSEs, and this will come in handy for DIPAM. It is critical to deliver much more than what was targeted. If the government thinks that it is too much of a load for the Ministry of Finance to carry out the disinvestment process, given the plethora of responsibilities assigned to them, the government should not shy away from creating a separate ministry for disinvestment and appointing a minister for the same.

Dr Ramakrishnan T S, Public policy and macroeconomic analyst.

NTPC Green IPO Sees Strong Start, Retail Portion Oversubscribed on Day 1

November 19, 2024, 8:29 pm

The Initial Public Offering (IPO) of NTPC Green Energy Ltd (NGEL) witnessed strong participation on its first day, with around one-third of the shares on offer being subscribed. The retail investor segment saw significant enthusiasm, as their portion was oversubscribed by 1.5 times, according to the latest data.

IPO Price Range and Offering Details

NTPC Green has set the IPO issue price at ₹102-108 per share, with a minimum lot size of 138 shares. The company is offering fresh equity shares worth ₹10,000 crore, amounting to approximately 92.59 crore shares. Of the total, 75% of the offering is reserved for Qualified Institutional Buyers (QIBs), 15% for High Net-Worth Individuals (HNIs), and 10% for retail investors.

From the ₹10,000 crore raised, ₹7,500 crore will be allocated to its wholly-owned subsidiary, NTPC Renewable Energy Ltd (NREL), for repayment or prepayment of loans, capital expenditure, and general corporate purposes.

Market Leadership in Renewable Energy

Promoted by NTPC, NTPC Green Energy is a significant player in India’s renewable energy sector (excluding hydropower), boasting a robust portfolio. As of June 30, 2024, its portfolio included 14,696 MW of capacity, comprising 2,925 MW of operational projects and 11,771 MW of contracted and awarded projects. An additional 10,975 MW is under development, bringing the total portfolio to 25,671 MW.

The company plans to commission 14 GW of pumped hydro-capacity over the next 6-9 years, compared to the current installed capacity of 3.3 GW. It has 5.9 GW under construction and another 10.8 GW in the pipeline. NTPC Green also aims to achieve 60 GW of renewable capacity by 2032, underscoring its commitment to sustainable energy growth.

NTPC Green received approval from the Securities and Exchange Board of India (SEBI) in late October to proceed with the IPO. The company had filed its draft red herring prospectus (DRHP) with SEBI on September 18, 2024.

With India’s stock markets booming, companies are capitalizing on investor interest by going public. NTPC Green’s IPO reflects the trend of companies leveraging public offerings to fund expansion, with many achieving substantial success in the process.

Zomato Channels ‘Jai And Veeru’ Spirit With Hilarious Meme For Swiggy On IPO Day

November 13, 2024, 3:32 pm

Zomato celebrated its competitor Swiggy on IPO day with a special post that has fans comparing it to the legendary friendship of ‘Jai and Veeru’. Through platform X, Deepinder Goyal’s food delivery giant shared a meme commemorating Swiggy’s successful stock market debut today.

The post featured the caption, “You and I… In this beautiful world,” accompanied by a red heart emoji. Additionally, Zomato included a meme depicting two delivery drivers—one dressed in Zomato’s uniform and the other in Swiggy’s—observing the Bombay Stock Exchange. The LED display on the building read, “Now listed: Swiggy.”

Swiggy’s Reaction

Responding to the post, Swiggy commented from its official X account, stating, “It’s giving Jai and Veeru vibes.”

You and I… In this beautiful world ❤️ @Swiggy pic.twitter.com/sAFzd8z07E

— zomato (@zomato) November 13, 2024

Social Media Buzz

Users on X found the meme amusing and shared a variety of reactions. One user joked, “Hahaha… Brother hood. Why don’t you merge both? that will be a great monopoly with pricing power. Nobody will be able to enter this space then.”

Another user expressed, “Ye bhaichaara mujhe pasand aaya (I liked this brotherhood).” A third added, “Wow truce for today!” Meanwhile, a fourth user commented, “That’s a great gesture, showing how competition should be treated. Thanks Zomato and congrats Swiggy on a 7% return at your IPO listing.”

Swiggy’s $1.4 Billion IPO Fully Sold, Institutional Portion Overwhelmingly Demanded

November 8, 2024, 6:18 pm

Food and grocery delivery giant Swiggy’s initial public offering (IPO) worth $1.4 billion has been fully subscribed as of Friday, marking a significant milestone in India’s second-largest share sale of the year. Institutional investors showed strong demand, with the portion allocated to them being oversubscribed by 131%. Meanwhile, the retail investor portion was 97% subscribed.

Market Position and IPO Context

Swiggy holds a strong position as the No. 2 player in India’s food and grocery delivery market, trailing behind Zomato. The company has a 34% share in food delivery, while Zomato dominates with 58%. In the quick commerce segment, Swiggy’s Instamart holds 20-25% of the market, while Zomato’s Blinkit commands 40-45%, according to industry estimates.

Institutional Demand Reflects Long-Term Confidence

Despite Swiggy’s ongoing losses, analysts note that the IPO’s institutional subscription indicates strong long-term confidence in the company, particularly in India’s rapidly growing food delivery and quick-commerce market, which is dominated by Swiggy and Zomato.

Prashanth Tapse, senior vice president of research at Mehta Equities, remarked, “Institutional over-subscription on the third day … has happened as these investors generally subscribe keeping a long-term view – which looks strong for Swiggy given the duopolistic market in the booming food delivery and quick-commerce sector in India.”

However, Tapse cautioned that investors should not expect significant listing gains, given the current subdued market sentiment.

Despite strong demand from institutional investors, analysts expect Swiggy’s stock to have a muted debut when it lists on the exchanges next week. The company’s ongoing losses and broader market weakness are expected to keep its stock price under pressure. Swiggy posted a net loss of 23.5 billion rupees for the fiscal year ending March 2024, although this was a 44% improvement from the previous year.

While Zomato has managed to turn a profit in fiscal 2024 after a loss in the previous year, Swiggy’s profitability remains elusive, which could temper investor expectations for the IPO’s initial performance.

Reliance Jio Plans IPO for 2025, Potentially India’s Largest Ever

November 4, 2024, 6:40 pm

Billionaire Mukesh Ambani is reportedly preparing an initial public offering (IPO) for his telecom venture, Reliance Jio, slated for 2025. Following this, an IPO for Reliance Retail is anticipated, although it will come at a later date. According to sources cited by Reuters, this IPO could potentially surpass Hyundai India’s record $3.3 billion IPO, marking it as one of the largest in Indian history.

Analysts currently value Reliance Jio at over $100 billion, attributing its IPO plans to the company’s robust business model and revenue stability. As India’s leading telecom provider with 479 million subscribers, Jio’s growth trajectory supports this valuation. Although an official valuation decision is pending, investment bank Jefferies had estimated Jio’s worth to be around $112 billion as of July this year.

Competitive Landscape and Recent Investments

The IPO development arrives amid mounting competition, particularly as Reliance Jio prepares to face off against Elon Musk’s Starlink internet service, pending its launch in India. Additionally, Ambani has successfully raised $25 billion for his telecom, digital, and retail enterprises from notable investors, including KKR, General Atlantic, and the Abu Dhabi Investment Authority. Jio Platforms, which encompasses Jio’s telecom and digital sectors, has seen 33% of its equity acquired by foreign investors after raising $17.84 billion in recent years.

Future Plans for Reliance Retail

The IPO for Reliance Retail, which manages India’s largest grocery network with 3,000 supermarkets, is expected to be launched after 2025. This delay is attributed to “operational issues” within the retail division, which Ambani’s team intends to address before proceeding with an IPO. Moreover, to avoid overwhelming the market with two significant IPOs simultaneously, Reliance aims to focus on stabilizing its retail operations first.

Challenges in Retail Growth The operational challenges facing Reliance Retail stem from its rapid expansion, which included entering the e-commerce space to compete with Amazon and adopting quick commerce models for 10-minute deliveries. This swift growth has resulted in losses for some physical stores, leading the company to report a 1.1% decline in sales for the July-September quarter. Despite these challenges, Bernstein valued Reliance Retail at $112 billion last year.

Rekha Jhunjhunwala Backed Style Baazar Set To Launch IPO This Week: Report

August 20, 2024, 11:49 am

Baazar Style Retail backed by Rekha Jhunjhunwala, popularly known as Style Baazar, is set to launch its initial public offering (IPO) this week, as per reports. The company, which filed its draft red herring prospectus (DRHP) in May, plans to raise ₹185 crore through a fresh issue of equity shares. Additionally, the IPO will feature an offer for sale (OFS) comprising up to 1.68 crore shares, which will be offloaded by promoter group entities and other selling shareholders.

Details of the Offer for Sale

Rekha Rakesh Jhunjhunwala, a prominent backer of the company, is set to sell 27.23 lakh equity shares as part of the OFS. Alongside her, Intensive Softshare Private Limited will divest 22.40 lakh shares, and Intensive Finance Private Limited will offload 14.87 lakh shares. The IPO will also include a reservation for subscriptions by eligible employees, offering them an opportunity to participate.

Utilization of Proceeds

The net proceeds from the IPO, estimated at ₹135 crore, are earmarked for debt repayment and general corporate purposes. This strategic move aims to strengthen the company’s financial position and support its growth initiatives.

Pre-IPO Placement and Financial Performance

Earlier in the month, Style Baazar successfully raised ₹37 crore in a pre-IPO placement from institutional investors, including Volrado Ventures Partners Fund II. This placement underscores investor confidence in the company’s potential and growth prospects.

Style Baazar has established itself as a leading player in the value retail market, particularly in West Bengal and Odisha. The company operates 153 stores across more than 1.39 million square feet, spanning 140 cities in 9 states. For the fiscal year 2023, Style Baazar reported revenue of ₹787.9 crore and a profit after tax (PAT) of ₹5.4 crore.

Lead Managers and IPO Process

The book-running lead managers for the IPO are Axis Capital, Intensive Fiscal Services, and JM Financial, with Link Intime India serving as the registrar for the issue. The company’s decision to go public marks a significant milestone in its journey, offering investors a chance to be part of its growth story.

Bhavish Aggarwal Set To Earn ₹288 Crore From Ola Electric’s IPO

August 2, 2024, 1:15 pm

Ola Electric Mobility Limited, led by Bhavish Aggarwal, has launched its initial public offering (IPO) today, August 2. The SoftBank-backed company aims to raise approximately ₹6,145.56 crore through this offering, marking it as India’s largest IPO of 2024 to date.

Ola Electric, which holds a significant 35% share of the Indian electric two-wheeler market, has set a price band of ₹72 to ₹76 per share for its IPO. The offer includes a total of 723,684,210 equity shares valued at around ₹5,500 crore. The funds raised will be allocated towards debt reduction, expanding its gigafactory, supporting organic growth, advancing research and development, and covering general corporate expenses.

Promoters Bhavish Aggarwal and Indus Trust are set to offload 37,915,211 and 4,178,996 equity shares, respectively. Bhavish Aggarwal, currently holding 1,361,875,240 equity shares, represents 36.94% of the company’s issued and paid-up equity. Should the shares be issued at the higher end of the price band, ₹76, Aggarwal could earn approximately ₹288.15 crore from the public offering.

The IPO represents a significant milestone for Ola Electric as it continues to expand its footprint in the electric vehicle sector.

Zepto Gears Up For IPO Following Record $665 Million Funding Round

June 21, 2024, 3:51 pm

Grocery delivery startup Zepto is gearing up for a potential initial public offering (IPO) following a significant rise in its valuation to $3.6 billion. The company secured $665 million in its latest funding round, marking one of the largest investments in the sector this year. This round was led by a consortium of US and local investors, including Avenir and Lightspeed, alongside Avra, a fund initiated by Anu Hariharan, former head of Y Combinator Continuity.

Zepto reported substantial growth, projecting to manage over $1 billion worth of goods annually based on its May performance. Notably, about 75% of its warehouses were profitable in May, a significant improvement from previous timelines. The company has reduced the profitability timeline for its stores from two years to six months, demonstrating operational efficiency.

Looking forward, Zepto plans an ambitious expansion, aiming to double its number of warehouses to over 700 by March 2025. This expansion will be funded by reinvesting revenues from mature stores.

Co-founder and CEO Aadit Palicha expressed confidence in Zepto’s readiness for public listing, stating, “I believe we will be ready to go public relatively soon.” Zepto faces competition from industry giants such as Amazon, Swiggy backed by SoftBank Group, Zomato, and Tata Group’s BigBasket. Zepto’s journey from a startup to a potential public company reflects its rapid growth trajectory and evolving market position in the competitive grocery delivery sector. Zepto’s IPO aspirations, bolstered by substantial funding and operational achievements, underscore its emergence as a key player in the global delivery market.

JG Chemicals’ IPO: All you need to know

March 4, 2024, 1:08 pm

J.G. Chemicals Ltd is all set to launch its IPO on March 5, 2024. The Equity shares are valued at Rs 10 each. The price range of the IPO is between Rs 210 and Rs 221 per equity share. The total issue size is around Rs 250 crore at the upper price band.

The market lot size is set at 67 shares for the IPO. Individual retail investors can apply for a maximum of 13 lots, which accounts for 871 shares or a total investment of Rs 1,92,491.

Out of the 250 crores (approx), Rs 165 crore is a fresh issue of shares which is expected to be used for investment in its subsidiary, setting up an R&D centre in Andhra Pradesh and more. The rest 86 crores are for sale. Post this, the holding will dip to 71%.

JG Chemicals is the domestic giant in zinc oxide. Further, the company is eyeing to ramp up the production of superior grades of zinc oxide which are used in skincare and electronics.

Indian markets rebound, with the Sensex gaining 1,000 points in opening hours

November 11, 2022, 11:31 am

Following the lead of Asian markets and US stocks, Indian markets rose early on Friday. By the beginning of the day, the S&P BSE Sensex had risen more than 1,000 points, and at 10.30 am, it was up 992 points to 61,609, while the Nifty50 was up 283 points to 18,311.95.

S&P BSE LargeCap, one of the broad-based indices, increased 104 points to 7,110 points, with the most active stocks on the index being Zomato, Naukri, and Bajaj Finance. BSE MidCap increased by 130 points to a new high of 25,558.73 as Godrej Properties and NHPC contributed to the index’s gain. Infosys shares increased 4.30 percent, and TCS shares increased 3.94 percent, making them two of the most active Nifty50 firms. The majority of IT stocks rose in the morning.

The BSE IT index increased 3.58 percent to a level of 1026.63, with Mindtree, Infy, Latent View, LTI, and Birla Soft among the index’s most active companies. Early on Friday, all Sensex constituents were trading higher. Infosys, Wipro, Tech Mahindra, Tata Steel, HCL Technologies, and IndusInd Bank were the companies that saw the most success in the early deals.

A smaller-than-expected rise in US consumer prices fuelled hopes that the Federal Reserve might scale back its aggressive pace of interest rate hikes, which led to sharp losses for the dollar on international markets.

The Dow Jones is up 3.70%, the Nasdaq is up 7.35%, all European stock market indices are trading in the green, and Asian stock market indices, including the Nikkei 225 and Hang Seng, are all up so far.

Hong Kong shares soared 6.5% in early trade while mainland China stocks began 2.1% higher.

On the first day of subscriptions, 23% of the Kaynes Technology India IPO was subscribed. According to NSE data, bids for the Initial Public Offering (IPO) of 1,04,70,246 shares on offer were outnumbered by 24,29,325 bids.