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8/4/2019 Final Ppt Me

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Disinvestment In

India


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Meaning of Disinvestment

Disinvestment involves the conversion of money claims,securities into money or cash by the government

The withdrawal of capital from a company or corporation

Disinvestment involves sale of only part of equity holdings heldby the government to private investors

Disinvestment process leads to dilution of ownership

Privatization refers to the transfer of ownership fromgovernment to private investors

Disinvestment is called partial privatization


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Objectives of Disinvestment

To generate revenue for the government

To provide for social welfare

To reduce budget deficit

To introduce the big reform - FRM


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Contd

To cool down stock & realty markets.

To help determine correct valuation of company.

To change the management of a sick unit.

Companies benefit

to raise loans easily & at lowrates


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VALUATION OF COMPANY

ADOPTED BY GOVERMENT

1. NET ASSET METHOD:

This will indicate the net assets

of the enterprise as shown in thebooks of accounts. It does notreflect the true position ofprofitability of the firm as itoverlooks the value ofintangibles such as goodwill,

brands, distribution network etc.This model is more suitable insale of asset and winding upmethod of disinvestment


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2. PROFIT EARNING CAPACITY VALUE METHOD:

The profit earning capacity is generally based on the profits

actually earned or anticipated. It values a company on the basis

of the underlying assets. This method does not consider or

project future cash flows.

3. DISCOUNTED CASH FLOW METHOD : In this method the future incremental cash flows are

forecasted and discounted to the present time value by applying

cost of capital rate. The method indicates the intrinsic value of

the firm and this method is considered as superior than other

methods.


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PhasewiseDetailsofDisinvestment

Year Target of Disinvestment Actual Receipts

1991-1992 2500 3037.74

1992-1993 2500 1912.51

1993-1994 3500 -

1994-1995 4000 4843.10

1995-1996 7000 168.48

1996-1997 5000 379.67

1997-1998 4800 910.00

1998-1999 5000 5371.11

1999-2000 10000 1860.14


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Year Target of Disinvestment Actual Receipts

2000-2001 10000 1871.26

2001-2002 12000 5657.69

2002-2003 12000 3347.98

2003-2004 4500 15547.41

2004-2005 4000 2764.87

2005-2006 NO TARGET FIXED 1569.68

2006-2007 NO TARGET FIXED -

2007-2008 NO TARGET FIXED 4181.39

2008-2009 NO TARGET FIXED -

2009-2010 25000 4259.90

2010-2011 40000 On going


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Current Policies

Revitalize the disinvestment program and plan togenerate at least Rs. 25,000 crore per year

Complete the process of selling of5-10% equity

The Government has announced a disinvestmenttarget ofRs. 40,000 crore for the fiscal 2010-11

The Government had also announced its intentionsof raising the minimum public shareholding in listedcompanies to 25% revised by 10%


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Current Proposal under Pipeline

IOC & ONGC :- Two of the countries largest oil and gas players Indian Oil Corporation

(IOC) and Oil and Natural Gas Corporation (ONGC)

Stakes to be disinvested : 10% from IOC & 5 % from ONGC

Together 24,000 crore approx

SAIL :-

The Union cabinet on Thursday cleared a move to disinvest 10% of the

governments equity stake in Steel Authority of India Ltd (SAIL) to raise an

estimated Rs8,000 crore.


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