Why These Two Big Govt Stocks Are Under Heavy Pressure Today

Shares of Mazagon Dock Shipbuilders and NLC India were under pressure on Thursday after reports that the government was looking to sell stake in the two public sector companies.

What Happened: India’s finance ministry is considering selling up to a 10% stake each in NLC India, Mazagon Dock Shipbuilders and Indian Railway Finance Corporation via an offer for sale (OFS) before March 31, aiming to boost disinvestment proceeds for FY24, Moneycontrol reported, citing sources.

The government may implement the OFS during January-March, aiming to sell not more than 10% of the government’s stake in these PSUs. The actual implementation of OFS is not expected to be problematic, but the disinvestment target relies heavily on strategic sales, which have been challenging in a pre-election year.

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Why It Matters: The government had set a disinvestment target of ₹51,000 crore for FY24, with ₹10,051.73 crore already garnered. A 10% sale of stakes in these three companies could fetch the government a maximum of ₹21,200 crore based on current market prices.

NLC’s shares have risen 80% in the past three months, while Mazagon Dock’s stock has increased 8%, and IRFC shares have advanced 36%. The government holds approximately 79% of NLC’s equity shares, 85% in Mazagon and 86% in IRFC.

Stake sales planned in fertiliser companies, including Rashtriya Chemicals and Fertilizers, National Fertilizers and Madras Fertilizers, are reportedly unlikely to occur in the current financial year due to a lack of investor interest.

Price Action: Mazagon Dock’s share price fell 0.68% to ₹2,267.15 in afternoon trade while NLC pared solid gains during the sessions to trade only 0.24% higher at ₹229.75 and IRFC shares were holding relatively steady, up 0.79% at ₹101.70.

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Posted In: EquitiesGovernmentRegulationsMarketsMoversTrading IdeasIRFCMazagon Dock ShipbuildersNLC India