Moneycontrol Pro Panorama | Asset monetisation is easy, but PSU IPOs won’t be a cakewalk
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In this edition of Moneycontrol Pro Panorama: NMP 2.0 is laudable and, if followed up well, can unlock huge capital for Indian economy
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For any observer of the Indian economy, the logic of India’s National Monetisation Pipeline (NMP) 2.0, targeting Rs 16.7 lakh crore between FY26 and FY30, isn’t hard to understand — recycle capital from mature public assets into new infrastructure. That’s a good idea.
Leasing highways, monetising transmission lines, or transferring airport operations to private partners generates upfront revenue without permanently losing ownership. That’s because these are the assets that already produce predictable cash flows, and private operators are often better placed to improve efficiency.
Before we discuss further, let’s go back a bit and see what government’s experience with the first monetisation cycle was. The original NMP, launched in FY22, covered the four-year period until FY25 and set a target of Rs 6 lakh crore.
It achieved nearly Rs 5.3 lakh crore, or about 90 per cent of the goal. That performance, while slightly below target, demonstrated that India can monetise infrastructure at scale when administrative coordination and investor appetite align.
In other words, the first NMP worked well.
What about this time?
Only this time, the target is much bigger.
The harder part of the new strategy is the plan to raise Rs 1.79 lakh crore through IPOs of public sector enterprises and subsidiaries by FY30. Unlike leasing roads or transmission lines, equity investors do not buy assets, investors buy governance, growth potential and trust.
This is where India’s broader PSU universe still carries baggage.
Public sector banks offer a clear contrast. After the Reserve Bank of India’s asset quality review (AQR) in 2015 forced banks to recognise hidden bad loans, the sector underwent painful but necessary repair.
The government injected over Rs 3 lakh crore in capital over subsequent years, governance improved, and balance sheets were cleaned up. As a result, PSU bank stocks have significantly rerated since 2021, with several now delivering returns comparable to private peers. Investors returned because transparency and profitability returned.
But that is half of the story…
Outside banking, that transformation remains incomplete. Many PSUs still operate under bureaucratic constraints, with limited management autonomy and strategic flexibility. Investment decisions often require ministry approvals. That is not something investors like.
When pricing, hiring and expansion can be influenced by political considerations rather than shareholder value, there is a problem. Minority investors have long feared that commercial logic may be subordinated to public policy objectives.
In my view, unless this gap narrows, the government may be forced to accept lower valuations or delay IPOs altogether.
To be sure, following India’s stock market boom in the last decade, the BSE PSU index has jumped 300 per cent while Sensex and Nifty gained 254 percent and 261 percent, respectively. Whether that performance was good enough vis-à-vis that of private peers is a matter of wider debate.
Walk the talk
The credibility challenge is compounded by past reform promises that stalled. In the Union Budget of 2021-22, Finance Minister Nirmala Sitharaman announced a bold privatisation policy, identifying strategic sectors where the government would retain only a minimal presence and proposing privatisation of two public sector banks and one general insurer.
Five years later, that agenda has seen limited progress. The Life Insurance Corporation listing in 2022 raised substantial capital, but broader bank privatisation has yet to materialise. Investors remember such delays, and policy continuity matters as much as policy intent.
The sectors now targeted for IPOs — railways, power, coal, gas and airports — are economically critical but structurally complex. Many of the entities in these sectors operate in regulated sectors where tariffs, subsidies and policy changes can significantly affect profitability. Investors will demand clarity on long-term regulatory frameworks.
That apart, market conditions will also play a decisive role. If PSU IPOs are priced aggressively or lack compelling growth narratives, demand may fall short.
As I mentioned above, political will, ultimately, is the decisive variable. Asset monetisation through leases is politically easier because ownership remains with the state. Equity listings, even minority ones, invite scrutiny from labour unions, political opposition and sections of the bureaucracy.
That said, the economic rationale of NMP remains compelling. If the government uses the next few years to genuinely professionalise PSU management and demonstrate reform consistency, the Rs 1.79 lakh crore IPO plan could deepen India’s capital markets and unlock enormous value. If not, the monetisation pipeline may succeed while the equity pipeline struggles.
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