Magazine article Global Finance

Privatization Program Fails to Meet Targets

Magazine article Global Finance

Privatization Program Fails to Meet Targets

Article excerpt

INDIA

The Indian government gave a final - and less-thansuccessful - push to meet its targeted sales of shares in government-run companies for the 201 1-2012 fiscal year. Against a target of $8 billion the divestment program had only raised $250 million by the end of February. As a result, the government rushed through the sale of 5% of equity of oil and gas producer ONGC in March. It used a one-day auction method in which shares are sold to the highest institutional bidders, but received bids for only 420.4 million shares - or roughly 98% of the total offer - at the floor price of R290 ($5.9) a share. Plus, a big portion of the shares were taken up by state-owned entity Life Insurance Corporation of India. The government's insistence on a 2.3% premium to the prevailing market price hurt demand for the stock.

The government is considering ways to pull cash out of state-owned companies as it faces a widening fiscal deficit, either through share buybacks or through special dividends. …

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