Disinvestment policy

Presented by N.karthikeyan II M.B.A'

Contents

Introduction Definition Objective of disinvestment Reasons for disinvestment Problems of disinvestment Overview of India's disinvestment Conclusion

Introduction

Investment and disinvestment are two sides of the same coin. Investment refers to conversion of money or cash into securities, debentures, bonds or any other claims on money. At the same time, disinvestment invloves the conversion of money claims or securities into money or cash.

Definition

The action of an organisation or government selling or liquidating an asset or subsidiaryis called disinvestment

Objectives of disinvestment

To reduce the financial burden on government To improve public finances To introduce, competition and market discipline To increase growth of the firm To encourage wider share of ownership

Reasons for disinvestment

To meet fiscal deficit Expantion or diversification of the firm To repayment of government debts Implementation of government plan PSU's give negative rate of return on capital

Problems of disinvesment
Dilution of ownership Disinvestment affects labour

Overview of India's disinvestment

Disinvestment policies introduce after new economic policy in july 1991 The disinvestment policy as an active tool to reduce the burden to financing the PSU NIF (National investment fund)

Government has a borrowing plan of 4,00,000cr roughly 2,45,000 cr would raised through OMO

1991-92

31 PSU were disinvested and collected amount 3038 cr 20506 cr were collected through disinvestment policy 12,300 cr was generated 7300 cr used to fiscal deficts

1991-01

1991-96 was

UPA government received 47,901cr from investment of equity in PSUs 2004-05 2005-06 2006-07 2007-08 2008-09 4424cr 1581cr 534cr 38,785cr 2,567cr

UPA government is plan to generated 1120cr from disinvestment in 2009-10

This year generated 1120cr from disinvestment like issue of IPOs there are

Oil India RITES Cochin shipyard manganese ore telecommunication consultant india rashtriya ispat

Coming IPOs are:

NHPC IPO will open on Aug 7 and it will close on Aug 11 NHPC plans to raise 6048cr from its 15% stake (168cr share issue) 5% is goes to govt disinvestment other 10% will use for company growth.

United Bank IPO will come end of december United Bank is plan to raise 400cr from its 20%stake

Proposal plan - 45000cr

Conclusion

Thank you