WSJA(2/4) Heard On The Street: Offers Fall Short Of P-Word

   (From THE WALL STREET JOURNAL ASIA)

India is in the midst of what will be its biggest campaign to sell off state-owned assets since 1991. Just don't think of this as privatization.

The latest sale, a $1.8 billion block of National Thermal Power Corp. shares owned by the Indian government, kicked off Wednesday. For that sum, New Delhi will give up 5% of the company, retaining control of nearly 85%.

Last year, New Delhi raised $1.8 billion via two stock offerings, and there are more to come. Three other offerings, valued at about $6.5 billion, are expected by the end of March, and the finance ministry has identified nearly 60 companies in which the government will divest small holdings over the next three years.

The moves are welcome in a country looking to fund a yawning fiscal deficit. New Delhi's timing also looks fortuitous: Indian stocks are approaching historic highs.

On Wednesday, investors snapped up half the NTPC offering within an hour of the subscription's opening. State-run companies might be stodgy, but they are also stable, which appeals to foreign investors dipping into India.

Still, the small stakes up for grabs -- 5% or 10% of the companies in question -- make this a fund-raising exercise rather than a meaningful shift toward less state control. Given India's political scene, it is the best anyone can expect.

Previous efforts toward privatization have become mired in political feuding, largely thanks to opposition from powerful labor unions and left-leaning parties. Even successful moves, such as a 51% stake sale in Bharat Aluminium Co. in 2001, met stiff resistance in Parliament before passing.

Along the route, many ambitious plans, such as one to divest the government's holding in national carrier Air India, were lost entirely.

Apart from some scattered deals, the past 18 years have largely been devoid of any notable sales by the government.

Investors are eager for the potential to buy some of India's biggest companies, which are bolstered by their state backing and conservative operations. For the same reason, off-loading a big chunk of these family jewels is a hard sell in Parliament.

The P-word has never been popular there. That isn't likely to change soon.

-- Harsh Joshi

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February 03, 2010 14:30 ET (19:30 GMT)

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