India to Sell Stake in National Aluminium Friday

A panel of Indian ministers Wednesday gave the government the go-ahead to sell a part of its stake in state-run National Aluminium Co. 532234.BY +1.99%Ltd. through a public offering Friday, Disinvestment Secretary Ravi Mathur said.

The federal cabinet had already approved a 12.15% stake sale in the aluminum producer. Wednesday’s meeting of the panel of ministers was to decide the date of the sale as well as the share price, which Mr. Mathur said will be announced after market hours Thursday.

Mr. Mathur didn’t give details on whether Friday’s sale will be for all of the proposed stake or if it would be sold in tranches. However, another senior finance ministry official, who didn’t wish to be named, said the size of Friday’s offering would be announced later Wednesday.

The two officials also didn’t say how much the government hopes to raise through the offering.

On the basis of Wednesday’s closing price of 46.30 rupees a share, the government will be able to raise 14.5 billion rupees ($267 million) if the whole 12.15% stake is sold. The government owns a total of 87.15% of the company.

The stake sale is part of its disinvestment plan under which it plans to raise up to 300 billion rupees in the fiscal year ending March 31 to meet its spending needs.

The funds are crucial for the government to narrow its gaping fiscal deficit that hasn’t only contributed to a severe deterioration in domestic economic conditions but has also put its sovereign rating under threat of being downgraded to non-investment grade status.

However, weak market conditions in the early part of the year led to a slow start of the disinvestment program, leaving the government very little time to complete the planned stake sales for the year.

The government has managed to raise a little less than 220 billion rupees and in its annual budget presented late February, it has accounted this fiscal year’s disinvestment revenue at 240 billion rupees, leaving a shortfall of 20% over the initial target.

It has budgeted disinvestment revenue of 400 billion rupees in the next fiscal, but there are doubts if this can be achieved given its past track record. The government hasn’t met the disinvestment target even once since it began setting them in the fiscal year to March 2011.

On Tuesday, the ministers’ panel also had decided to postpone a stake sale in state-run commodity trader MMTC Ltd. 513377.BY -1.12%as it didn’t accept the valuation proposed by bankers.