India plans to combine its national shares of state-run businesses to create its first sovereign wealth fund
This equity is normally invested in some of the private companies as the case with SUUTI.
The Narendra Modi government is envisaging at creating the first and so far the only sovereign wealth fund in India by pulling together its stakes in the publicly floated state owned companies as per Mint.
To generate its investment capital, the fund will employ newly issued and outstanding shares, received cash dividends, attract other wise strategic investors and shares margins.
The measure will entail selling of shares from the existing listed public sector undertakings (PSUs) and Specified Undertaking of the Unit Trust of India (SUUTI). This equity is normally invested in some of the private companies as the case with SUUTI.
This plan which is still under active consideration could mobilise a potential corpus of Rs 50 trillion from these companies and will be deployed for domestic and international investment.
The Centre owns more than 51 per cent in 48 listed firms out of which all to be shifted to this fund. The future stakes of newly listed companies will also be transferred as well.
“The Centre may also sell new shares in these PSUS minus voting rights, so that its own voting rights do not get diluted. Additionally, it may bring in regulation for so-called golden share, which gives its owner relatively more power in terms of management and economic rights, and special control,” the Mint report says.
The article also being of the opinion that the government has approached specialists, including the managing director of Kotak Mahindra Asset Management Co. Nilesh Shah and the chief economist Neelkanth Mishra of Axis Bank for inputs on the subject.
According to the report, the goal is to establish a professionally managed SWF which is on the lines of India’s Temasek and GIC of Singapore which were set up in 1960’s and 1970’s. These sovereign funds played a significant role on the creation of giant organizations such as Singapore International Airlines.
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