DIVESTMENT

&
DISINVESTMENT
By Prof.
M K Verma
DIVESTMENT
 The term divestment means the disposal of a
business or a segment of the business.
 It also means the disposal of certain sections

of a business.
 The process of selling an asset. Also known

as divestiture, it is made for either financial

or social goals.
 The term divestment is also known as

divestiture.
 Divestment is the opposite of investment.
 It is usually done when a company finds that
one of the divisions under its administration
is carrying out those activities which are not
compatible with what it regards as its core
business activities.

 It refers to the reduction of some kind of

assets, which is done to either attain some
financial or social goals.
  The term divestment is more appropriate
however in the following contexts:
1. A change in corporate strategy - a firm might
say that they are divesting a particular
subsidiary to focus on their core business.
2. Social goals - there are many political reasons
why investors might reduce investments. A
notable example is I T C not increasing more
investment in cigarettes .
DISINVESTMENT
 The term disinvestment is defined as the
shrinkage of capital investment which is
caused by the failure of a firm to maintain or
replace its capital assets which are being
used up or by the sale of the capital goods by
the firm, such as the equipment owned by it.
 Disinvestment also means the withdrawal of

capital from a country or a corporation.

 It was a term which was first used in the

1980's.
 It was most commonly used in the United States
of America to refer to the use of a concerted
effort to boycott South Africa in the economic
sphere.

 The term disinvestment was used in India to

mean the privatization of assets held by the
State.

 The minister for disinvestment is a post at the

cabinet level.
Thanks