Privatisation Push Slows As Investor Interest Fades

India’s push to privatise state-run companies is losing momentum, with the government now weighing whether to pause a few planned stake sales after seeing limited investor interest.

The latest setback came with the IDBI Bank sale, where bids did not meet the minimum price set by the government.

That outcome has raised questions about how easily other public sector assets can be sold in the current environment.

What Was The Government Plan?

The government’s main idea behind privatisation was to gradually exit most businesses and retain a presence only in a few key sectors, such as telecom and banking.

In practice, progress has been slow. Apart from the sale of Air India to the Tata Group, only a few transactions have gone through, including the transfer of Neelachal Ispat Nigam to Tata Steel and Ferro Scrap Nigam to Japan’s Konoike Transport.

Some cases, like Shipping Corporation, saw initial interest but no clear outcome. Discussions are now underway to rethink the approach, possibly exploring alternatives to a straight sale. The divestment department has proposed either restarting the sale process or considering a merger with Container Corporation of India to create a more integrated logistics entity.

The government had also considered privatising Container Corporation around 2021–22, but the plan never advanced beyond the early stages. HLL Lifecare faced a different challenge, with potential bidders asking for changes in terms but eventually not proceeding.

Why Are Buyers Turning Cautious?

The hesitation is not coming from a single issue. Pricing is one part of it. In several cases, investors feel the valuation leaves little room for risk.

Concerns over unresolved obligations, especially pension and gratuity payouts, also made potential buyers more cautious.

Global uncertainty, including developments in West Asia, has made investors more careful about large commitments.

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What Can Investors Expect Next?

The immediate path does not look very clear. The government may need to adjust expectations, especially on pricing and deal structure, if it wants to revive interest.

Investors will be watching whether future deals come with clearer terms and fewer uncertainties. That often makes a bigger difference than the asset itself.

For now, deals are not off the table, but they are not moving quickly either. Much will depend on whether both sides, the seller and the buyer, find a middle ground in the coming months.

Sources:

ET

Business Standard