Modi Plans $3 Billion of Share Sales to Meet Budget-Deficit Goal

The Indian government will sell minority stakes in four state-run companies to help meet its budget-deficit target for the fiscal year that ends March 31.

The government will sell 10 percent holdings in oil refiner Indian Oil Corporation Ltd., National Aluminium Company Ltd. and mineral explorer NMDC Ltd. and pare its stake in power equipment maker Bharat Heavy Electricals Ltd. by 5 percent, it said today in announcements on its website. It is seeking bankers to handle the divestments on Indian stock exchanges.

Prime Minister Narendra Modi and Finance Minister Arun Jaitley have said the government will fulfill its goal of narrowing the deficit to a seven-year low of 4.1 percent of gross domestic product this fiscal year. The gap had reached 99 percent of the target in the first eight months of the year that began in April.

At today’s closing prices, the share sales would bring in about 182 billion rupees ($2.96 billion) to the national exchequer, according to calculations by Bloomberg. All the proposed divestments include the option of allocating shares to company employees at 5 percent discounts to the issue price.

BHEL shares have risen 67 percent over the last year, compared with the 36 percent advance in the benchmark S&P BSE Sensex Index. Indian Oil has climbed 45 percent in that period. Nalco has gained 29 percent and NMDC has declined 5.5 percent. The Sensex today climbed to a record high. It rose 27 percent last year.

Coal India, Phone Spectrum

The government also has other actions planned for reaching the deficit target. The gap stood at 5.25 trillion rupees in the eight months ended November compared with a goal of 5.31 trillion rupees for the year through this March.

Plans are being developed to sell stakes in the country’s monopoly coal miner, Coal India Ltd., Power Minister Piyush Goyal said Jan. 15. The plan is with the divestment department of finance minister and a sale will be announced at an appropriate time, he had said.

The government also expects to raise 648.4 billion rupees auctioning telecommunications airwaves starting Feb. 25 to mobile phone companies.

Failure to meet the deficit target would probably disappoint global investors who bought a record $26.4 billion in local debt in 2014.