Prime Minister Narendra Modi assumed office nearly a decade ago with a goal of privatizing 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 privatized in India and several recent candidates have stalled.
Apart from the sale of IDBI Bank, which is already underway, progress has slowed for other companies, a person familiar with the privatization 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 labor issues. Market watchers are now skeptical that the government will prioritize privatization during the campaign season.
That development has likely shelved Adani’s ambition to acquire businesses like Concor, the country’s leading freight rail operator, which has a market capitalization of close to $5 billion. In a February analyst 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 didn’t respond to requests for comment.
So far, the only major sale is the Tata Group’s 2021 acquisition of Air India for $2.2 billion. Though symbolically a success, the airline was sold after two prior attempts — despite prized landing and parking spots at key locations across the world.
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 privatization candidates.
“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.
Others point to the government’s poor track record as a reason for the shift in priorities. In 2020, Modi’s administration announced its biggest-ever asset sales plan of 2.1 trillion rupees ($25.5 billion). By the end of the year, India had raised just 16% of its target.
Last year, the finance ministry called off the planned sale of Bharat Petroleum Corporation Ltd., which would have marked India’s largest deal. Most bidders walked out of the process because of the pandemic, energy transition issues and disruptions to the oil and gas industry — leaving only Vedanta Resources, the mining conglomerate, in the fray.
The financial challenges of Indian businessmen with the funds to bid on assets haven’t instilled confidence. Consider Anil Agarwal, the founder of Vedanta, who’s in the mix for bidding on several public sector companies, including Concor and NMDC Steel Ltd.
Officials have threatened legal action if the transaction goes through. New Delhi is worried that Agarwal’s zinc deal may impact valuations for the government’s own plan to sell its stake. Vedanta didn’t return requests for comment.
“There is firm acceptance, in principle, of the need for more private ownership,” she said. “Yet the execution of privatization is often a complex task.”
Privatization candidates (listed companies) |
Status |
Interested parties* |
Bharat Petroleum Corporation Limited Process |
called off in May |
Vedanta |
Container Corporation of India Ltd (Concor) |
Expression of interest yet to be invited |
Adani, Vedanta, Allcargo Logistics, PSA International |
NMDC Steel Ltd. |
Financial bids yet to be invited |
Adani, Vedanta, Tata Group, JSPL, JSW Steel |
Shipping Corp. |
Financial bids yet to be invited |
Vedanta, Safe Sea Services, JM Baxi, Megha Engineering |
IDBI Bank |
Financial bids yet to be invited |
|
BEML |
Financial bids yet to be invited |
Ashok Leyland, Bharat Forge, Tata Motors |
Units of ITDC |
Expression of interest yet to be invited |
ITC, Indian Hotels |
*Source is local media reports |