Budget 2022: Until most of the budget is read in detail, its most important thing is not understood. This becomes even more important when it comes to the disinvestment target of the government. The budget document shows that the government has set a target of raising Rs 65,000 crore through disinvestment in government companies in the financial year 2022-23. This is much lower than the disinvestment target of 1.75 lakh crore set for the current financial year 2021-22.
Until the budget was presented, economists had estimated that the government may keep the disinvestment target in the range of 1.2 to 1.5 lakh crore for the next fiscal. However, contrary to all estimates, the government has kept its target very low. This was expected only when the disinvestment target was not mentioned in the budget speech of Finance Minister Nirmala Sitharaman. This was an indication that the disinvestment target of the government may be lower than expected this time.
However, this less-than-expected target of this disinvestment has made many economists and market experts worried about the IPO of Life Insurance Corporation (LIC). They are not able to understand whether the government has kept the amount from LIC’s disinvestment in this target or not.
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Finance Minister Nirmala Sitharaman has said that there is every possibility of LIC’s IPO coming in this financial year. However, seeing the disinvestment target, experts have been wondering, how much amount the government wants to raise through this issue. If we look at the figures kept by the government in the budget, then three situations arise regarding LIC, which will affect the government’s disinvestment target. Let us know the three methods-
1. Two-Part Launch Theory
In August last year, there were media reports that the government may split the entire issue of LIC into two parts. This is because there were concerns that the size of the largest IPO in the history of the Indian capital market might be a little too high for the market to handle. If this happens, it is possible that the government is targeting to raise around Rs 54,000 crore from the first phase of the IPO. This possibility also arises because the government, which has raised around Rs 24,000 crore through disinvestment so far this fiscal, has lowered its revised estimate for the entire fiscal to Rs 78,000 crore.
2. Decrease in ambitions
Last month, Blueberg had told in a report that the government wants a valuation of $ 203 billion (15 lakh crore) of LIC. At this valuation, the government can raise Rs 75,000 crore through the sale of 5 per cent stake. However, the government needs only Rs 54,000 crore to meet its projected target. This means that the government can achieve this target only if LIC has a valuation of 10,2 lakh crores.
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If the government brings LIC’s IPO at this valuation in one go, it would mean that the government has softened its ambitions on the valuation front. By the way, analysts are roughly estimating the valuation of LIC to be around $ 160 billion (12 lakh crore).
3. Realistic Goals
A third possibility is that the government may have set a realistic budget this time. Looking at the expenditure and income projections for the year 2021-22, the government does not expect any substantial increase in income from tax and other sources this time. It is possible that the government may have set the disinvestment target on similar lines. The Finance Minister had also said in the budget press-conference that, “I think we are very realistic this time.”
After LIC, Bharat Petroleum is in the process of finding buyers for Container Corporation of India, Shipping Corporation of India, three general insurance companies and two public sector banks.
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