The disinvestment of public sector firms (PSU) is expected to pick up pace in the coming days with the government mulling more PSU mergers to meet its highly ambitious disinvestment target of Rs 90,000 crore for the current financial year. The buzz is that the Centre may kick-start the process with power sector giant NTPC taking over SJVN, a deal which failed to take off last year owing to objections from Himachal Pradesh authorities.
“The power ministry, along with DIPAM officials, have had several rounds of meetings to discuss the contours of the merger and is keen on pushing through the deal by the end of this financial year,” said a senior official.
Officials are also in talks with the Himachal Pradesh government to get the latter’s nod which would help the central government net disinvestment proceeds to the tune of Rs 8,000 crore.
Another official aware of the developments said discussions are also ongoing over NHPC, another state-run power firm in the hydroelectric segment, buying out the government’s stake in SJVN initially, and at a later stage, NTPC could become the holding company for both utilities. “While the merger structure is yet to be finalised, if NTPC were to acquire both, SJVN is a better asset given its growth potential and valuation,” said Subhadip Mitra, Director (Power Utilities and Renewables), JM Financials.
Earlier known as Satluj Jal Vidyut Nigam Limited, SJVN is a mini ratna public sector entity, under the administrative control of the Ministry of Power and incorporated as a joint venture of the Government of India and the Government of Himachal Pradesh. It is now a listed company with 63.79 per cent shares held by the Centre and 26.85 per cent by the Himachal Pradesh government. The present paid-up capital and authorised capital of SJVN are Rs 3,929.80 crore and Rs 7,000 crore, respectively, with net worth at Rs 11,239 crore.
NTPC, meanwhile, is also learnt to have evinced interest in SJVN and made it clear that it will like to take management control. NTPC’s acquisition of the Centre’s stake in SJVN will be in line with the government’s aim of increasing the non-thermal asset base of India’s largest power producer. Currently, NTPC has an installed capacity of 52,946 MW, while SJVN has 2,003.2 MW.
North Eastern Electric Power Corporation Ltd and Power Grid Corporation of India Ltd are a few other firms where synergies arising from mergers and acquisitions are being explored. The government is also learnt to be considering a merger of loss-making Neelachal Ispat Nigam (NINL) with Rashtriya Ispat Nigam (RINL) and later merge this company with Steel Authority of India (SAIL) to create a single steel PSU. The creation of large integrated PSUs is being considered in other sectors too in order to provide depth to profitable CPSEs.
But, mergers have their challenges. A case in point being the amalgamation of ONGC and HPCL where the latter didn’t recognise ONGC as its promoter despite the government’s directive to do so.
The Centre has managed to meet and exceed its disinvestment targets for the last two financial years. In 2017-18, it raised one lakh crore rupees, compared to a budgeted target of Rs 72,500 crore, where the bulk was realised from ONGC’s acquisition of Hindustan Petroleum. In FY19, share sales through exchange traded funds helped it garner the highest amount of Rs 45,729 crore, followed by Rs 14,500 crore acquired through the sale of its 52.63 per cent stake in REC.
Mega-mergers Ahoy!
The government is not just looking to make a giant power sector PSU player via a merger, but is also examining similar opportunities in the steel sector, among others. The government is learnt to be considering a merger of loss-making Neelachal Ispat Nigam (NINL) with Rashtriya Ispat Nigam (RINL) and later merge this company with Steel Authority of India (SAIL) to create a single steel PSU. The creation of large integrated PSUs is being considered in other such sectors too
As far as the NTPC-SJVN merger is concerned, officials are in talks with the Himachal Pradesh government to get the latter’s nod, which will net it H8,000-odd crore
Discussions are also taking place on NHPC buying the government’s stake in SJVN initially, and NTPC taking over the merged company later
North Eastern Electric Power Corporation Ltd and Power Grid Corporation of India Ltd are a few other firms where mergers are being explored