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India's privatization roadmap fail to cheer investors
By siliconindia
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Tuesday, 10 December 2002, 20:30 IST
NEW DELHI: The Indian government's announcement of a controversial plan to sell off two state-run oil companies has failed to enthuse investors in the absence of a timeframe for its completion.
Analysts and fund managers say the absence of a timetable for privatising Hindustan Petroleum Corporation Ltd. (HPCL) and Bharat Petroleum Corporation Ltd. (BPCL) betrays the government's lack of urgency to push through the sales.
"There wasn't enough in the announcement to completely neutralise the shock that was imparted to the system with the decision to put off the sale for three months," said Subir Gokran, a senior economist with credit rating firm CRISIL Ltd.
"The investors were putting a lot of premium on the transfer of ownership of HPCL and BPCL by the end of the current fiscal year. They now find their expectations completely belied," Gokarn told IANS.
Disinvestment Minister Arun Shourie told the Lok Sabha in a much-awaited statement Monday that the government would sell its stake in HPCL to a private company and privatise BPCL through public offering.
But apart from providing no timetable for the sale, Shourie was also silent on how much of its stake in the oil refiners the government would sell.
The government had postponed the sell-off process of two oil giants, which together control 40 percent of India's two million barrel-a-day oil market, for three months in September in the face of intense political squabbling.
Reflecting the bearish investor sentiment, shares of HPCL fell 2.5 percent in the early trade on the Bombay Stock Exchange Tuesday to 
266.50 and BPCL lost nearly four percent to 200.90.
The market benchmark 30-share Bombay Stock Exchange sensitive index or Sensex was also quoting 0.4 percent lower at 3,255.85 at noon.
Shares of HPCL and BPCL had soared as much as 15 percent in last week's trade on hopes that the government would unveil a clear roadmap for the privatisation of the two oil majors by the end of the current fiscal year.
"The minister's statement has failed to clear the doubts from the investor minds. It's not clear when the sell-off process would actually start and by when it would be completed," said Neeraj Deewan of the New Delhi-based Quantum Securities.
"Nothing fundamentally has changed in the last three months from the day the government decided to halt the privatisation process due to political differences.
"So the decision not to set a timeframe for the completion of the sale clearly shows that the going ahead for the government may not be absolutely trouble free," Deewan added.
Shourie, who made a statement amid protests from the opposition in both houses of parliament, said the privatisation panel would meet after the December 12 elections in Gujarat to decide the size of the stake sales in HPCL and BPCL.
"If obstructions are put, then it will not happen this year," he said.
The minister said that conditions were also not conducive for restarting due diligence for a stake sale in the public sector National Aluminium Company Ltd. (NALCO), the country's second-largest aluminium maker.
Due diligence for NALCO was halted late in October after workers opposing its privatisation stopped a team of potential bidders from inspecting its main plant in Orissa.
The government had earlier hoped to complete the privatisation of NALCO by end of February next year.
"The drop in the share prices of the public sector companies is the reflection of the uncertainty hovering over the whole privatisation exercise," Gokarn of CRISIL said.
"The government has failed to convince the market that it is serious about the sell-off drive. So the investor would rather like to pare their exposure in public sector counters and wait for some definite direction to emerge."
266.50 and BPCL lost nearly four percent to 200.90.
The market benchmark 30-share Bombay Stock Exchange sensitive index or Sensex was also quoting 0.4 percent lower at 3,255.85 at noon.
Shares of HPCL and BPCL had soared as much as 15 percent in last week's trade on hopes that the government would unveil a clear roadmap for the privatisation of the two oil majors by the end of the current fiscal year.
"The minister's statement has failed to clear the doubts from the investor minds. It's not clear when the sell-off process would actually start and by when it would be completed," said Neeraj Deewan of the New Delhi-based Quantum Securities.
"Nothing fundamentally has changed in the last three months from the day the government decided to halt the privatisation process due to political differences.
"So the decision not to set a timeframe for the completion of the sale clearly shows that the going ahead for the government may not be absolutely trouble free," Deewan added.
Shourie, who made a statement amid protests from the opposition in both houses of parliament, said the privatisation panel would meet after the December 12 elections in Gujarat to decide the size of the stake sales in HPCL and BPCL.
"If obstructions are put, then it will not happen this year," he said.
The minister said that conditions were also not conducive for restarting due diligence for a stake sale in the public sector National Aluminium Company Ltd. (NALCO), the country's second-largest aluminium maker.
Due diligence for NALCO was halted late in October after workers opposing its privatisation stopped a team of potential bidders from inspecting its main plant in Orissa.
The government had earlier hoped to complete the privatisation of NALCO by end of February next year.
"The drop in the share prices of the public sector companies is the reflection of the uncertainty hovering over the whole privatisation exercise," Gokarn of CRISIL said.
"The government has failed to convince the market that it is serious about the sell-off drive. So the investor would rather like to pare their exposure in public sector counters and wait for some definite direction to emerge."