Govt set to add Nalco, Hindustan Copper to divestment list; stocks jump

After inking a deal with the Tata Group to sell the loss-making national carrier Air India and setting in motion the process for the mega listing of Life Insurance Corp of India (LIC), the government is now reportedly looking to divest its stake in two other companies—National Aluminium Company (Nalco) and Hindustan Copper Ltd (HCL). 

The government will soon seek a formal nod from the Union Cabinet, before moving ahead with the sale of the two mining companies, The Economic Times newspaper said in a report.

Why is the government looking to sell these companies now?

Over the last few months, as the global economy has reopened following nationwide lockdowns across most of the world, commodity prices have gone through the roof. This has further been exacerbated by supply-side constraints.

This has weighed heavily on emerging market economies like India, which have had to deal with the inflationary impact of such price hikes. However, companies in the mining and minerals space have seen their toplines and bottom lines swell. It is this uptick in their fortunes that the government is looking to cash in on and divest them while it can command a good value for them. 

When will the actual stake sale take place?

The actual stake sale could take place in the next financial year, but the news report cited earlier said that the government wants to complete the process for the same within this financial year itself. 

Will the government completely exit these companies?

While the government’s think tank, the Niti Aayog, has recommended privatisation, the government could retain a small stake in these companies, the report added, citing an unnamed official. 

The government holds 66.14% of Hindustan Copper and 51.28% of Nalco.

How are the two companies doing on the stock market?

Nalco shares closed at Rs 90.45 on the NSE Monday, giving it a market value of Rs 16,580 crore. Its shares have traded between a 52-week low of Rs 37.4 and a recent high of Rs 124.75.

On Tuesday, Nalco jumped as much as 5.7% to Rs 95.25 apiece before trending a tad lower.

Hindustan Copper ended at Rs 114.15, at a market value of Rs 11,050 crore. The stock is down from a peak of Rs 196.90 earlier this year but still up sharply from its 52-week low of Rs 42.25.

On Tuesday, Hindustan Copper climbed as much as 5.15% to Rs 120.25 apiece before cooling off a bit.

But are big investors really interested in acquiring these companies?

Yes, several investors including the Anil Agrawal-controlled Vedanta Group are reportedly interested in acquiring Hindustan Copper. 

What is the disinvestment target for the current financial year?

The government wants to mop up Rs 1.75 lakh crore via disinvestment this year. Of this, a bulk—about Rs 1 lakh crore—is likely to come via the initial public offering of LIC. 

Apart from Air India, which other companies has the government sold thus far in the current financial year?

Last week, the government approved the strategic sale of Central Electronics Ltd to Delhi-based Nandal Finance and Leasing Pvt Ltd for Rs 210 crore.

How many more sales are in the offing?

The government is working on as many as 17 divestment proposals. These include Project & Development India Ltd, Engineering Project (India) Ltd, BEML Ltd, Bharat Petroleum Corporation Ltd (excluding Numaligarh Refinery Ltd), Container Corporation of India Ltd and Rashtriya Ispat Nigam Ltd.