India plans $880 million of share sales in March

Labourers work inside a steel factory on the outskirts of Agartala, Tripura, November 6, 2009.

MUMBAI (Reuters) - India plans to raise about $880 million next month cutting its stakes in two state companies, sources with direct knowledge of the matter said, a move that will help the government tackle the budget deficit.

Asset sales are a key part of the government's plan to cut the deficit to 5.3 percent of gross domestic product for the fiscal year to end-March, from 5.8 percent in 2011/12, to avoid a credit downgrade.

The government was expected to sell a 10.82 percent stake in steelmaker Steel Authority of India Ltd (SAIL.NS) via a share auction in the third week of March, three sources with direct knowledge told Reuters on Thursday.

The SAIL stake is worth about $620 million at current prices and its sale would leave the government with a 75 percent stake.

The government also plans to sell a 12.15 percent stake worth about $260 million in National Aluminium Co Ltd (Nalco) (NALU.NS) early next month, two other sources said.

All the sources declined to be named because they are not authorised to speak to the media before a public announcement.

Neither Nalco nor SAIL was available to comment.

(Reporting by Sumeet Chatterjee; Editing by Dan Lalor)