India plans raising $2.8bn by merging power companies

Bloomberg

India is planning to sell its stake in SJVN Ltd. and Power Finance Corp. to other government-controlled companies in deals that may fetch the federal government about 200 billion rupees ($2.8 billion), helping it to rein in the fiscal deficit amid growing risks of a slippage, people with knowledge of the matter said.
The government plans to sell its 63.8 percent stake in hydropower producer SJVN to NTPC Ltd., the nation’s largest thermal power producer, to garner about 80 billion rupees, the people said, asking not to be named as the information isn’t public. The other deal being considered will see Rural Electrification Corp. Ltd. buying the federal government’s 65.6 percent ownership in Power Finance Corp. Ltd., they said.
While helping the government raise resources to meet its budget deficit target, the discussions reflect Prime Minister Narendra Modi’s aim to create larger energy companies through consolidation. The first such merger happened last year when Oil and Natural Gas Corp. acquired the government’s stake in state-controlled refiner Hindustan Petroleum Corp. Ltd.
“This is disinvestment by proxy,” Amit Mantri, founder of 2Point2 Capital Advisors, said by phone.
“By selling stake in one state-run company to another the government can claim to have monetised its stake. But this is only an optical reduction in fiscal deficit.”