The IPO is estimated to fetch the government around ₹65,000 crore.
“With the likely deferral of LIC IPO to FY23, the budget shortfall for FY22 will be huge, and the pressure on Reserve Bank of India, public sector banks and state-owned companies to pay a higher dividend to the government will increase to partially compensate for it,” said Piyush Nagda, head – investments products, Prabhudas Lilladher.
GAIL’s board will meet on March 11 for the interim dividend, while the BEL board meeting has been scheduled for March 17.
On Monday, shares of several state-owned firms across the sectors, including ONGC, Coal India, GAIL, National Aluminium, NMDC, Hindustan Copper, NHPC, Oil India, and MOIL, gained between 2% and 13% as the benchmark indices declined nearly 2%. BSE CPSE index rose 1.21%, while BSE PSU index fell 0.6% compared to the 2.8% fall of Sensex. Shares of the companies that have run up of late are linked to commodities, which have seen a sharp surge in prices since Russia’s invasion of Ukraine.
In FY21, state-owned companies and banks paid total dividends of nearly ₹75,000 crore to shareholders, including the government. BPCL paid almost ₹16,500 crore, including a special dividend, while Indian Oil Corporation paid over ₹11,000 crore. Coal India paid dividend of nearly ₹10,000 crore.
“In all probability, the LIC IPO will be postponed to the next fiscal which would result in a shortfall in the government’s budget math. With less than a month to go, there are few avenues in front of the government to fill the gap,” said Vijay Singhania, chairman, TradeSmart.
“One avenue is asking public sector companies and banks to cough up higher dividends, but that may not be enough to move the needle,” Singhania added.
The government is looking to offload 5% stake in LIC for 65,000 crore to 70,000 crore. Its revised FY22 divestment target is 78,000 crore. So far, the government has raised about 12,000 crore from the privatisation of Air India and stake sale in other state-owned companies.
“The inevitable consequence of the LIC IPO deferral would be that the revised fiscal deficit target of 6.9% of GDP for FY 22 will be missed. But this will not impact the fiscal deficit target of 6.4% for FY23,” said V K Vijayakumar, chief investment strategist, Geojit Financial Services. “PSUs are already paying 30% of their profits or 5% of their net worth, whichever is higher. Extracting higher dividends from them would impact their capex plans.”
