1. What is disinvestment?
Selling shares of PSU (Public Sector Undertaking) companies (Government companies) through IPO (Initial Public Offering) and FPO (Follow on Public Offer) is called disinvestment.
IPO (Initial Public Offering) will be listed for unlisted companies.
FPO (Follow on Public Offer) will be for already listed companies.
Indian government is planning to sell its holdings in the form shares of 60 PSU’s through IPO & FPO
A). Some of the listed companies for which IPO can be expected are -
1. NTPC
2. Bharat Electron
3. Container Corp
4. BEML
5. Hind Copper
6. NMDC (National Mineral Development Corp)
7. GAIL
8. Power Finance
9. Rural Elect Corp
10.Shipping Corp
11.Neyveli Lignite
12.GMDC (Gujarat Mineral Development Corp)
B). Some of the unlisted companies for which IPO can be expected are,
1. Bharat Sanchar Nigam Ltd
2. Sutlej Jal Vidyut Nigam Ltd
3. Vidyut Nigam Ltd
4. Coal India Ltd
Reasons to invest in these companies
1. Disinvestment would give these companies better operational flexibility
and increase accountability.
2. At present, these PSU companies have a valuation gap compared with
the private sector. This will narrow as operational parameters of PSU
companies improve.
3. PSU today account for around 30% of the overall market capitalization
of the BSE. Market experts expect this to go up to 40-45% in the next 2
to 4 years.
4. These are quality companies in their respective sectors that are core to
India’s growth story. These companies are backed by the government
and so unlikely to go bust in the near future. Also many of them have
huge order books and are known to pay high dividends.
Cautious Approach
1. Already the stock prices of these companies rallied and recently touched
52 week high and their valuation look expensive. So investors planning to
invest in these companies should plan to buy at lower levels, like, if Nifty
comes down to 4600, investors can plan to buy these stocks.
2. Currently markets are trading in bearish phase and any further correction
can put more pressure on these stock prices.
3. Also investors planning to achieve listing gains (IPO) should be very
cautious as markets are bearish so expecting big listing gains looks
difficult; only long term like 3 to 5 years investment period would provide
good returns.
4. As a precaution note you can write to us to know the levels to buy.
Current hot news of disinvestment
Welcome to Indian Share Market
Your Desire to Earn
In recent days you would have heard lot of news about “Government disinvestment plan”.
In the following subsections we will see how this disinvestment plans makes some companies worth and provide good opportunities for investment to buy the stocks on these companies.
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