Weak investor interest stalls India's privatisation drive for shipping firms

Higher valuation

IDBI Bank's scrapped sale derailed what was seen as a model for future bank privatisations, after a high reserve price and Middle East-related geopolitical uncertainty curbed investor interest, an industry source said. Also, the lack of protection for liabilities such as pension and gratuity dues further deterred investors.

The failed sale will likely hit divestment receipts for the next financial year, starting April 1, Wahal said. India has targeted INR800 billion ($8.66 billion), in asset monetisation and divestments, with a significant portion earlier expected from IDBI Bank.

This comes as the Middle East crisis threatens to raise India's oil import bill, adding pressure through higher inflation and a wider current account deficit.

"The government's privatisation plan has hit a wall," said N.R. Bhanumurthy, director at the Madras School of Economics. Potential bidders will be interested in acquiring state-run companies if valuations are attractive, he said.

(Reporting by Nikunj Ohri Sarita Chaganti Singh in New Delhi; Additional reporting by Gopika Gopakumar in Mumbai and Raju Gopalakrishnan)