India can kickstart stake sales but jumbos unlikely
By Charlotte Cooper and Surojit Gupta
MUMBAI/NEW DELHI (Reuters) - Emboldened by winning a confidence vote, India's government is expected to revive a privatisation drive, but a looming election means it will only have time for a few small sales rather than any jumbo ones.
The government could do with the cash to offset a hefty subsidy bill that is pressuring its finances, but public offerings of $2 billion or bigger could not be completed ahead of national elections that have to be held by May 2009, bankers say.
A major headwind is weak investor appetite following a 30 percent slump in the stock market this year. The stock market may only be able to absorb offers of up to $500 million, they said.
D.K. Joshi, principal economist at ratings agency Crisil, said the government would offer some stake sales to offset a widening fiscal gap, which rating agencies say could hit 9 percent of GDP this year from a projected 5.5 percent in 2007/08.
"Three to four companies are possible and it could provide funds for infrastructure spending as during times of fiscal stress investment in infrastructure suffers," Joshi said.
"But the timing from the market perspective may not be right as prices are low now and investor appetite is not there in a big way. So we will have to see how they go along."
Newspapers say plans for a jumbo $10 billion initial public offering from Bharat Sanchar Nigam Ltd (BSNL), the top telecom firm by total subscribers, are being dusted off.
But senior bankers say a deal that big is unlikely ahead of the elections. Continued...
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