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‘Privatisation processes are BMMP (bandwidth, market available, minority shareholders, and the process)’, said Tuhin Kanta Pandey
LIC is a long-term investor and has diversified portfolios, Tuhin Kanta Pandey, secretary, the Department of Investment and Public Asset Management (Dipam), tells Shrimi Choudhary in an interview, amid concerns about the insurer’s exposure to Adani group companies. He also sees the FY24 disinvestment target as pragmatic, yet challenging because of uncertainties in the market. Edited excerpts:
Do you think LIC shareholders need to be concerned about its exposure to Adani group companies? Is the development posing a systemic risk?
I can’t comment on “systemic risk” as these issues have been looked at by the regulators. They (LIC & banks) have a limit on large exposures. Both banks and LIC have clarified that they don’t have a large exposure to the Adani group. LIC keeps investing in companies as prescribed under the Irdai rules. A very large proportion of the LIC investment has to be in government bonds and only a smaller portion can go into equities. In equities also, it has diversified portfolios. So the short-term movement of individual stocks does not impact them. Overall, LIC and regulators must be watching the change in the value of its (the former’s) investments.
The disinvestment target for FY24 is pegged at Rs 51,000 crore. Is it a realistic target and how are you planning to achieve it?
It is a pragmatic target but achieving this is a challenge because of uncertainties in the market.
We had a target of Rs 1.05 trillion, inclusive of disinvestment worth Rs 65,000 crore and dividends of Rs 40,000 crore. Our RE (revised estimate) is now Rs 93,000 crore and comprises Rs 50,000 crore from disinvestment and Rs 43,000 crore from dividends. So far, we have raised a total of Rs 68,000 crore.
The BE (budget estimate) for FY24 is pegged at Rs 94,000 crore. This includes Rs 51,000 crore from disinvestment proceeds and Rs 43,000 cr from dividends.
We have minority stake sales in the pipeline through initial public offerings (IPO), offer for sale (OFS), and buyback, and also through strategic disinvestment.
Bandwidths are different for different companies. In the case of buybacks and OFS, we have limited scope for minority stake sales (with the government holding capped at 51 per cent). For IPO, we are creating a new bandwidth. Other than minority stake sales, our focus is on completing the ongoing privatisation transactions which are in the pipeline, including IDBI Bank, Shipping Corporation, and BEML.
Does a slow process limit non-debt capital receipts?
Privatisation processes are BMMP (bandwidth, market available, minority shareholders, and the process). A process particularly is time intensive and takes time and it is rare that we get everything in time. We have streamlined the internal process through education and awareness. And all these we need to take into consideration. The awareness has to come that disinvestment actually helps businesses to grow and even secure people’s jobs and make the company viable.
Disinvestment is a collective effort. So from where the resistance is coming?
The contradiction in what we are trying to do in the case of privatisation is quite stark. A lot of work has to be done by the company itself. There is a lot of resistance, unwillingness, and apprehension over the process. Friction is there as companies want to stay in the government. A lot of cooperation is required from companies themselves. So there are both external and internal factors. Sometimes even matters in court pose challenges from employee unions. These things also influence the management of companies.
The RBI in a recent circular said a person looking to acquire more than 5% stake in a bank needs to take prior approval. Will this impact the IDBI bank sale?
These are listed companies. So in the case of a bank, if you hold more than a certain percentage, it will require prior approval from the Reserve Bank of India. The RBI policy says that banks have to be widely held. And that is why, under the Banking Regulation Act, there is a voting share cap of 26 per cent, even if you are holding 50 per cent. In banking companies, it is very important to monitor the shareholding and also key shareholders. So, IDBI being a specific case where the RBI, it says, is involved in the entire process and will do the fit and proper, and it has to ultimately require approval.