Indian Government To Divest 15%-20% Stake In IRCTC: Killing Two Birds With One Stone

Must Read

Hands-Free Resources: How Businesses Are Using AR to Make Workplaces Safe and Productive

The role of efficiency and ease in the modern world has become forefronted when it comes to technology, particularly...

Top Countries by App Downloads Q2 2021: India Dominates With 7 Billion+ Downloads [REPORT]

As the adoption of smartphones and the Internet has increased over the last decade, so has the number of...

TikTok Is Now The World’s Most Popular Non-Facebook App With Record 3 Billion Downloads!

When you think of the world's most popular apps, the first name comes into your mind: Facebook. If not,...

The COVID-19 pandemic wrecked all industrial sectors globally and the Indian government sector was treated no differently.

Amid the mounting financial pressure, the Indian government is currently planning to sell off close to 15%-20% stake in IRCTC via OFS, aka offer for sale. In order to expedite the inflow of funds, the government is aiming for the transaction to be completed within the minimum number of tranches.

DIPAM or the Department of Investment and Public Asset Management, in the previous month, greenlit the invitation of bids from merchant bankers for managing the sale in Indian Railway Catering and Tourism Corp (IRCTC).

Advertisements

A pre-bid meeting has already been held on September 4 with potential bidders. 

Now, on its website, DIPAM has posted their responses to all the queries raised by other potential bidders.

To one query wherein intended stake dilution percentage was asked about, DIPAM replied by stating that it is 15% to 20%. The exact details will be shared soon with the merchant bankers who are selected in the screening process.

As of right now, the Indian government’s stake in IRCTC is 87.40% but according to SEBI’s public holding norm, it has to lower its stake in the company to 75%.

On the BSE, today, i.e Tuesday, the shares of IRCTC was observed to be closing at 2.57% lower at ₹1,378.05.

Advertisements

DIPAM, to another query which sought to clarify if payment will be made by the Indian government to merchant bankers after the completion of every single tranche or cumulatively after the completion of the entire transaction, replied that GOI doesn’t want an OFS overhang.  

Therefore, it is aiming to complete the entire transaction in the minimum possible number of tranches which is advised by merchant bankers based on current market conditions.

They further clarified that GOI aka Government of India will opt for pro-rata form of payment to merchant bankers in case more than one tranche is used.

IRCTC was listed on stock exchanges in the month of October in 2019. Currently, it is the only entity which is authorised by Indian Railways to provide various catering services to railways, online railway tickets and packaged drinking water at railway stations and trains in India.

IRCTC Stake Selling: A Calculated Move?

it appears to be both a well-planned move and a need that will help the government fight against the troubling times the COVID-19 situation brought upon us all.

The Indian government had a divestment target of ₹2.10 lakh crore for the ongoing fiscal and thus this IRCTC OFS can be seen as an effort to inching further towards the same goal. 

Of the proposed ₹2.10 lakh crore divestment plan, ₹1.20 lakh crore is to come from disinvestment of public sector undertakings and ₹90,000 crores has been planned to come from stake sale in financial institutions.

Now, because of the sudden outbreak of the coronavirus this year which impacted the equity markets heavily, DIPAM has not been successful to sell stake in any CPSE aka Central Public Sector Enterprises so far. But, the government has however been able to garner ₹11,000 crores worth of ‘AAA’ rated bonds of CPSEs through Bharat Bond ETF-II.

Besides this, the GOI as of late has been in hot water with the GDP shrinking historically low to 23.9%. Along with that the union government finding it difficult to honour the entire compensation sum which it owes to states on account of shortfall in collections of Goods and Services Tax (GST) is also troubling. 

Thus, it is quite understandable why the Indian government is looking forward to raising money as quickly as possible within the minimum number of tranches. We will keep you updated on all future developments. Until then, stay tuned.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest News

Top Countries by App Downloads Q2 2021: India Dominates With 7 Billion+ Downloads [REPORT]

As the adoption of smartphones and the Internet has increased over the last decade, so has the number of...

In-Depth: Dprime

Will ‘TikTok By Microsoft’ Be A Winner?

For the last two years, TikTok has been in the public eye for all sorts of reasons. First, it was the exploded and unparalleled...

Facebook Subscription Model: Looking Beyond Ad Dollars?

Seldom do job listings create a stir this gripping. However, when the job listing in question is a stealth post from Twitter, with a...

Will The Online Food Delivery Market in India End Up Becoming A Two-Horse Race?

It's pretty much evident that the food delivery space in India is all set to get riled up soon enough as one of the...

More Articles Like This