For the fiscal year 2021, the government has set an aggressive divestment target of Rs.2.10 trillion and it surely struggling with this target. Now it has an extra problem on hand. The sharp correction has dampened IPO appetite and the government risks getting tepid valuations for LIC. That means, a mega issue like LIC is unlikely for the time being.

Regarding Air India and BPCL, there are 2 problems. The ban on international travel and weak oil prices has made it tough to divest Air India and BPCL for now. To compensate for the shortfall, at least partially, as well as to finance its stimulus program government may look to raise Rs.20,000 crore immediately via stake sale in Coal India and a large PSU bank.

But here too there are problems. For example, in the case of Coal India, the government may not get a good valuation due to weak commodity prices so it could look at a buyback by the company with its cash reserves. In addition, the government may look at a large institution taking a chunk of its stake in a bank to reach the target, but that will be tough.