Elections 2014: Will PSU Selloffs Be On The NDA's Agenda Again?

As anticipations of a BJP-led government coming into power build in the power corridors and PSU boardrooms, a strong murmur of a policy U-turn has been doing the rounds. Unlike the incumbent UPA, the NDA government's ideology is of selling off stake in PSUs. In its last stint at the centre till the year 2004, the BJP-led NDA was on a sort of selling spree, even creating a dedicated Ministry of Disinvestment under the leadership of Arun Shourie. At that time, it sold 35 big-small PSUs in around 4 years and encashed Rs 11000 crore via disinvestment.

With the BJP-led government expected to come to power in 2014 election, rumours are rife about another possible big-ticket PSU selling spree. Naturally, the managements of these companies seem under enormous pressure. “The government would need a huge amount of funds to fulfill its poll promises and to headstart a fresh wave of growth and development. For that, the most crucial ingredient would be cash and liquidity. For the BJP-led government, selling PSUs is a favourite exercise and it has given them great results in the past too”, a senior official of an oil PSU told DSIJ.

The very thought of the BJP coming to power has already thrown senior officials of oil & gas PSUs into a tizzy. During the last days of its regime, the NDA had even put BPCL and HPCL on the block, a move that was ultimately thwarted by a Supreme Court ruling. “We have to understand that any government coming into power would be needing money and for it selling PSUs is the easiest option. In its past stint, NDA has financed the Golden Quadrilateral highway project from the proceeds of divestment, and this time around, it is bound to happen again”, the official remarked.

Among the pet projects of the NDA government are the river interlinking project, 8-laning of all existing National Highways, extension of dedicated freight corridors, greater investment in power generation, transmission and distribution, creation of SEZ and logistics parks, etc. Even if we go by the present report of the Planning Commission, around Rs 66 lakh crore would be needed for these infrastructure projects during the 12th Plan period in order to take infrastructure spending to the targeted levels of 10% of the GDP.

Taking these ambitious plans into account, we may see big PSUs up for divestment the coming months. This would certainly play an important role in generating crucial finances for the same. PSUs that may be in the line of fire in case of a change of regime could include BPCL, HPCL, MRPL, RINL, CONCOR, Petronet LNG, BSNL, NMDC, NALCO, ITDC, ITI, Scooters India and STC.

For shareholders, such a move may unlock good value, as happened in the case of Maruti, VSNL (now Tata Communications), BALCO, Hindustan Zinc, etc. Investors in the PSU space may see enormous opportunity in the coming months.