On July 10, 2020, the Government of India announced its intention to sell its stakes in Coal India Limited (CIL) and IDBI Bank to raise 20,000 crore (approximately $2.67 billion). This decision of the government to sell its stakes in CIL and IDBI Bank, whose share prices are almost 70 per cent and 55 per cent lower than their five-year peak, is short-sighted (see Chart). It comes on the heels of the governments sale of its 11.47 per cent stake in ITC Limited and 4.59 per cent stake in Axis Bank in May 2020 for 22,000 crore.
As of June 30 this year, the aggregate value of governments stakes in CIL and IDBI Bank was an estimated 74,805 crore. To raise 20,000 crore, the government would have to sell around 27 per cent holdings in both entities.
Media reports have stated that CIL may buy back the governments stake if no other suitable buyers are found. Though CILs outstanding cash and bank balance stood at 31,124 crore as of end-March 2019, it is essential for the company to maintain ample liquidity to discharge its commitments to its employees, vendors and lenders rather than to effect a share buyback.
https://www.thehindubusinessline.com/opinion/psu-stake-sale-needs-a-rethink/article32174812.ece
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On July 10, 2020, the Government of India announced its intention to sell its stakes in Coal India Limited (CIL) and IDBI Bank to raise 20,000 crore (approximately $2.67 billion). This decision of the government to sell its stakes in CIL and IDBI Bank, whose share prices are almost 70 per cent and 55 per cent lower than their five-year peak, is short-sighted (see Chart). It comes on the heels of the governments sale of its 11.47 per cent stake in ITC Limited and 4.59 per cent stake in Axis Bank in May 2020 for 22,000 crore. As of June 30 this year, the aggregate value of governments stakes in CIL and IDBI Bank was an estimated 74,805 crore. To raise 20,000 crore, the government would have to sell around 27 per cent holdings in both entities. Media reports have stated that CIL may buy back the governments stake if no other suitable buyers are found. Though CILs outstanding cash and bank balance stood at 31,124 crore as of end-March 2019, it is essential for the company to maintain ample liquidity to discharge its commitments to its employees, vendors and lenders rather than to effect a share buyback. https://www.thehindubusinessline.com/opinion/psu-stake-sale-needs-a-rethink/article32174812.ece