India's rush to sell state-owned stakes raises $6.5 billion

The Indian government has sold stakes in 10 state-owned companies this year, raising more than 620 billion rupees ($6.5 billion). Wednesday's sale of a 6.5% stake in Life Insurance Corporation of India brought $3.3 billion, one of its biggest stake sales to date. The offer was priced at a 10% discount and was oversubscribed.

The LIC sale pushed the government past 65% of its annual disinvestment target of 800 billion rupees ($8.4 billion), according to data from Prime Database, an Indian market intelligence provider. The last time India met its disinvestment goal was in the fiscal year ending March 2019.

Excluding LIC, the government has sold stakes in nine other state-owned firms in 2026, raising nearly 270 billion rupees ($2.8 billion). Prime Database said that is the highest non-LIC haul in more than 10 years. The sellers include Cochin Shipyard, Indian Railways Finance Corp, NHPC and Coal India.

India's fiscal deficit stood at 3.1 trillion rupees, or 18.2% of the budget estimate for the financial year ending March 2027, at the end of June. The goods and services trade deficit for the April-June quarter was $37.4 billion. Foreign investors have pulled capital out of the country, weakening the rupee and tightening domestic financial conditions, experts said.

"Tapping into the divestment proceeds is a very good strategy," Anubhuti Sahay, head of India economic research at Standard Chartered Bank, told CNBC. Sahay said the government faces downside revenue risk and upside expenditure risk because of a higher subsidy burden. She described the stake sales as tapping into the "family silver" in times of need.

Citi, in a report on Monday, called the trend "favorable." Fuel and food subsidies, as well as fertilizer support, rose 37% on year in the quarter ended June. The government has not scaled back its capital expenditure, the brokerage said.

The acceleration of stake sales reflects "greater fiscal pressure," Alexandra Hermann Prasad, lead economist at Oxford Economics, told CNBC. The funds provide "useful non-debt revenue as strong expenditure growth makes the deficit target harder to achieve," she said. Non-debt revenue carries no future repayment liability.

Higher-than-expected proceeds from disinvestment are likely to ease fiscal pressures arising from GST rationalization in September 2025 and costs tied to the policy response to the Middle East shock, Christian de Guzman, senior vice president in the sovereign risk group at Moody's Ratings, told CNBC.

J.P. Morgan expects India's IPO activity to pick up in the second half of 2026, supported by improving market conditions and lower volatility, Abhinav Bharti told CNBC's Inside India on Tuesday. The IPO of Bain Capital-backed Dhoot Transmission opens Aug. 10.