12 September,2026 05:14 PM IST | New Delhi | mid-day online correspondent
Representational Image. File pic.
According to a Axis Capital report on Saturday, strong government disinvestments could expand the domestic equity market's investable universe, ease valuation pressures and support fiscal consolidation amid mounting fiscal risks, reported news agency IANS.
The report said the government's holdings in listed companies have grown to around Rs 44 lakh crore, nearly four times the level seen before COVID-19. A steady divestment programme could help the government generate significant revenue while increasing the number of shares available for public trading, supporting fiscal consolidation and improving capital flows, it said.
A large portion of the government's listed investments is concentrated in banks and non-banking financial companies (NBFCs). If the government reduces its ownership in these companies by 15 per cent over the next three years, it could raise nearly Rs 6.6 trillion, the report estimated. Such sales could also increase market liquidity and lower the risk of money flowing out of the domestic equities, it noted.
"Accelerated divestments could help narrow the demand-supply imbalance, reduce pressure for foreign investor exits, and address the market's underlying plumbing problem of excess demand for equities," it said.
India has seen significant capital outflows over the past two years, even though the emerging-market (EM) benchmark index has outperformed the US market over the last 18 months. Taiwan and South Korea, which have benefited strongly from the artificial intelligence (AI) boom, have also recently witnessed large outflows.
The report said foreign investors have offloading their stake in India due to high valuations and lower-than-expected corporate earnings over an extended period. Besides, domestic investors provided the cushion by absorbing shares sold by foreign portfolio investors (FPIs) in the secondary market, even at relatively high valuations.
However, the report cautioned that fiscal pressures could remain high in FY28 as the government implements the 8th Pay Commission. In such a situation, divestment could provide a more sustainable way to raise funds, it pointed out.
"Assuming a 12 per cent growth rate for income tax compared to the implied rate of 18 per cent leads to a shortfall of Rs 762 billion. Meanwhile, higher subsidy spending adds to fiscal pressures," the report added.
Government achieves over 78 per cent of disinvestment and asset monetisation target
Indian government has raised 62,124 crore this year through disinvestment and asset monetisation, so far, achieving about 78 per cent of the FY27 target within five months.
The Centre's FY27 budgeted disinvestment estimate and asset monetisation target is Rs 80,000 crore and it has mopped up Rs 55,757 crore so far, this fiscal through divestment in public sector undertaking (PSU).
The government sold minority stake in nine PSUs, which includes the high-value entities such as LIC and Coal India, as well as through strategic sale of Indian Medicines Pharmaceuticals Corporation and remittances from SUUTI.
State-run insurance major Life Insurance Corporation of India (LIC) accounted for more than half of the disinvestment proceeds. The government had garnered Rs 31,515 crore by offloading 6.5 per cent stake in the company. Besides, Coal India's 2 per cent share mopped up Rs 5,542 crore, while its 6.01 per cent stake dilution in NHPC secured Rs 4,357 crore to the exchequer. It divested 6 per cent stake in Hindustan Copper to raise Rs 3,041 crore.
Central Bank of India, coal mining firm NLC India, General Insurance Corporation of India (GIC), Indian Railway Finance Corporation (IRFC), and Cochin Shipyard, are some of the other PSUs in which the government has disinvested its stake.
Besides, it raised Rs 6,367 crore through asset monetisation via infrastructure investment trusts (InvIT).
The government is also mulling a strategic sale in IDBI Bank. It has received revised bids from Dubai-based Emirates NDB and Prem Watsa-led Fairfax Financial Holdings, after a failed attempt earlier this year.
Amid concerns over expenditure exceeding the budget estimates due to higher energy and fertiliser import bills, the government is accelerating the drive for miscellaneous capital receipts or disinvestment and asset monetisation in the current fiscal.
The fiscal deficit target for FY27 is at 4.3 per cent.
(With inputs from IANS)
