No big-bang disinvestment: Government strategy is to do small amounts of ‘minority stake sale’ in CPSEs

The government is opting for a gradual divestment of minority stakes in central government-owned enterprises as part of its revenue strategy, using recent successes to address budget challenges and strengthen public shareholding standards

A “surprise” sale of a minority stake, rather than a major divestment, is the government’s well-thought-out strategy to raise more revenue, a top finance ministry official has said.

The revelation comes at a time when the Finance Ministry is entering the final phase of preparing the Union Budget for the financial year 2026-2027 and there is some concern over government revenues, largely due to the temporary slowdown in the growth of VAT collections. Referring to the recently completed sale of minority stakes through offer for sale (OFS where the promoter sells part of his stake) in Bank of Maharashtra, which was hugely subscribed, almost five times by non-retail investors and 1.2 times by retail investors, the official said this is the preferred route that causes least disruption and political backlash. In the sale of the minority stake of the Bank of Maharashtra, the government received a total offer of about ₹5,000 crore, while the actual receipt (including the green shoe option) was more than ₹2,600 crore.

“We will continue to sell some of our stake in CPSEs,” the official said, declining to name the CPSE or public financial institution next in line, or how many will be on the list for the current fiscal. “Announcing the name well in advance will have an impact on the valuation,” the official added. During the current fiscal year to date, Mazagaon Dock Shipbuilding is the second public sector entity where the government used the OFS route to offload 3.61 percent of its assets and earned over ₹3,600 crore.

At present, there are 66 CPSEs listed on the stock exchanges. The value of the government’s stake in these companies is over ₹23 lakh crore. Apart from this, 16 public financial institutions (banks and insurance companies) are also listed on stock exchanges and the value of government share in these institutions is over ₹18 lakh crore.

This data gives the government plenty of leeway to sell a minority stake and make a significant amount of money. In many companies, the government has to reduce its stake to achieve the minimum public shareholding norm of 25 percent in various CPSEs and public financial institutions. This will necessitate further OFS of CPSEs in the coming months and also in the next fiscal year.

Last year, the then DIPAM secretary (now SEBI chairman) Tuhin Kanta Pandey had said that the focus now is more on value creation than just shedding or getting higher dividends. Elaborating on this view, current DIPAM Secretary Arunish Chawla has repeatedly said that the government’s efforts would be focused on value creation, more OFS and perhaps an IPO or two.

It is striking that there is nothing in the budget document called ‘disinvestment’. It started with the interim budget for 2024-2025, when a new head ‘Miscellaneous capital receipts’ was introduced, which includes receipts from the management of equity investments and public assets through various mechanisms. The annual divestment target was also removed from the revenue estimates.

This was the fourth major change since the formal process of disinvestment began in the late 1990s and the second major change in the eleven years of the Modi government. The first major change was the transformation of the Disinvestment Department into a Ministry in 2001. The second was the transformation of the Ministry into a department under the Ministry of Finance in 2004. The third change was the renaming of the Disinvestment Department as the Ministry of Investment and Public Asset Management (DIPAM) in 2016.

Published on December 7, 2025