Centre eyes over ₹45,000 crore from divestment in FY26, bets on sale of IDBI Bank

The stake sale in IDBI Bank is likely to fetch ₹30,000–35,000 crore, while ₹10,000–15,000 crore could come from the offer for sale (OFS) of equity in other listed public sector undertakings (PSUs), the people mentioned above told Mint on the condition of anonymity.

“The long-pending IDBI Bank stake sale is expected to conclude this fiscal. It’s the biggest-ticket item in this year’s divestment plan," said the first person cited above. “The rest is likely to come from minority stake sales in listed PSUs."

The central government and Life Insurance Corporation (LIC) together own 95% of IDBI Bank and plan to divest 60.72% of the combined shareholding. The privatization plan was first announced in the Union Budget for 2021–22.

Also read | Centre may raise about ₹10,000 crore in FY25 divestment, largely from OFS route

“The return from IDBI is a question of the quantum of stake sale from the government," said Rishi Shah, partner and economic advisory services leader, Grant Thornton Bharat. “At current market valuations, there is a potential for a windfall gain for the exchequer."

No divestment target

The Centre has stopped setting separate disinvestment targets since FY24. However, the budget estimate (BE) for miscellaneous capital receipts (MCR), which includes proceeds from equity investments and public asset management, is pegged at ₹47,000 crore for 2025-26.

For 2024-25, the MCR was revised to ₹33,000 crore from ₹50,000 crore pegged in the budget estimates.

Economists note that “miscellaneous capital receipts" is largely a matter of nomenclature, but the key issue is the government’s ability to mobilise funds under it.

“It (divestment) will depend on market conditions, the valuations and the inherent strength of the company, which is put up for disinvestment," said Devendra Kumar Pant is the chief economist at India Ratings & Research. “While in the last few years the government has not been able to meet its miscellaneous capital receipt/disinvestment targets in the last few years, earlier (in 2017-18) the government was able to overachieve its targets." 

Read this | Mint Primer: Is now the best time to pursue divestment?

“Probably a relook at reasons of over-achievement vis-a-vis under-achievement could help in fine-tuning the strategy," he added.

The central government has only met its disinvestment targets once in the last 10 years, in 2017-18. That year, it exceeded the target of ₹1 lakh crore, with actual proceeds of ₹1,00,056 crore

The divestment proceeds stood at about ₹10,000 crore in FY25, with most of it from the government’s minority stake sales in General Insurance Corporation of India ( ₹2,345.55 crore), Cochin Shipyard Ltd ( ₹2,015.32 crore), and Hindustan Zinc Ltd ( ₹3,449.18 crore), among others.

“There is no fixed divestment target anymore. The government has moved away from a numbers-driven approach to one that prioritizes strategy and value," said the second person, mentioned above.“It is a more pragmatic and calibrated process now, focusing on the right timing, favourable market conditions, and long-term value creation from public sector equity sales."

A spokesperson of the ministry of finance didn't respond to emailed queries.

“The government's move away from rigid divestment targets is a pragmatic acknowledgement of market realities. History shows us that actual receipts often fell short of targets. The important part is that the government is able to meet its target, which in turn enhances the credibility in the larger market," said Shah of Grant Thornton Bharat.

Also read | Centre may revive plan for fertiliser PSUs divestment in a phased manner from FY26

In January 2024, Mint had reported that there were as many as eight strategic disinvestment plans at various stages, which included selling the government's stake in the BEML Ltd, Shipping Corp. of India Ltd, HLL Lifecare Ltd, Projects & Development India Ltd, and Indian Medicines Pharmaceutical Corp. Ltd., among others.

Most of these have made little progress and could be taken up in the coming years, depending on the market conditions.

Fertilizer PSU sales still on hold 

There's no plan yet to revive the strategic sale of state-owned fertilizer companies during 2025-26, the second person mentioned above said.

"Divesting India’s fertilizer PSUs presents complex challenges, balancing efficiency with food security," the second person quoted earlier said. “While privatisation could enhance efficiency, it risks price volatility and market instability."

To be sure, the current subsidy regime complicates private sector participation, and many PSUs face financial and operational inefficiencies. Environmental concerns, job losses, and regulatory hurdles further complicate the process.

In 2022, Niti Aayog had identified eight fertilizer PSUs for strategic sale, but the Centre put the plan on hold the next year as it prioritised increasing domestic production.

And read | Budget 2024: Divestment target for FY25 may be at least 20% lower than last year’s

These included Brahmaputra Valley Fertilizer Corp. Ltd, Fertilizers and Chemicals Travancore, FCI Aravali Gypsum and Mineral Ltd, Madras Fertilizers Ltd, National Fertilizers Ltd, Rashtriya Chemicals & Fertilizers, Fertilizer Corp. India Ltd and Hindustan Fertilizer Corp. Ltd,

The central subsidies for fertilizers have seen a significant cut, from ₹1.71 trillion (revised estimates) in 2024-25 to ₹1.68 trillion (budget estimates) in 2025-26.