NEW DELHI: Prime Minister Narendra Modi assumed office nearly a decade ago with a goal of privatising more of India’s floundering state-owned assets.
For the nation’s business elite, that message was a clarion call to rescue an inefficient public sector.
But as the finances of some of those same tycoons come under scrutiny, with Gautam Adani and Anil Agarwal two high-profile billionaires, facing problems this year, Modi’s already-struggling campaign faces yet more hurdles.
Since 2014, only one major firm has been privatised in India and several recent candidates have stalled.
That’s a problem as the world’s most populous nation looks for ways to boost public finances and weather the ripple effects of global monetary tightening and banking turmoil.
The market capitalisation of the seven listed companies flagged for privatisation is about US$25bil (RM114bil), according to Bloomberg calculations.
Apart from the sale of IDBI Bank, which is already underway, progress has slowed for other companies, a person familiar with the privatisation push said, asking not to be identified because the discussions are private.
India’s national elections next year could further stall sales, the person said, especially for companies facing legal or labour issues.
Market watchers are now sceptical that the government will prioritise privatisation during the campaign season.
The Adani Group is a telling case study. To build up the world’s fifth-largest economy, Modi has leaned on a handful of businesses to improve India’s infrastructure and attract foreign capital away from places like China.
But after a short seller in New York accused the Adani Group in January of wide-ranging fraud, the company is going slow on new investments.
That development has likely shelved Adani’s ambition to acquire businesses like Concor, the country’s leading freight rail operator, which has a market capitalisation of close to US$5bil (RM23bil).
In a February call, Karan Adani, chief executive of Adani Ports, said the company’s “first order of preference” is to lower its debt before reconsidering the acquisition.
The Adani Group, which has vigorously denied wrongdoing, was a key sales candidate for Concor before Hindenburg Research’s report slashed more than US$100bil (RM456bil) of market value from the company.
Though Adani Group shares rallied this week after an Indian court panel’s report found no conclusive evidence of stock-price manipulation, Concor is unlikely to be on the company’s radar in the short term.
The Adani Group didn’t respond to requests for comment.
India’s privatisation drive has faced problems from the start.
Since 2014, the government has missed asset sales targets most years. Of the three dozen companies originally identified for sale, officials are now left with a list of just 17 (10 unlisted and seven listed), largely because of legal and insolvency issues.
So far, the only major sale is the Tata Group’s 2021 acquisition of Air India for US$2.2bil (RM10bil).
Indian officials have scaled back expectations. Disinvestment was hardly mentioned in Finance Minister Nirmala Sitharaman’s February budget speech, unlike in previous years when she announced targets or offered the names of privatisation candidates.
In recent weeks, Sitharaman placed some blame for the slow progress on the pandemic, global economic turmoil and geopolitical tensions after Russia’s invasion of Ukraine.
In an interview with Bloomberg News last month, she said that privatisation is challenging in India because of the number of stakeholders involved.
“Bids come in after a certain level of certainty,” Sitharaman said in the Bloomberg interview, noting that the upcoming national elections could also introduce volatility. — Bloomberg