Hindustan Copper, Cochin Shipyard, IRFC: Why is government rushing to sell PSU stakes via OFS in FY27?

Hindustan Copper OFS is the 9th offer for sale launched by the government in FY27. The government sold a 6% stake in Hindustan Copper to raise nearly ₹3,000 crore as the stake sale saw strong response from retail and institutional investors this week.

The Department of Investment and Public Asset Management (DIPAM) has been actively undertaking multiple OFS to dilute government minority stake in public sector undertakings (PSUs) via stock exchanges and unlock value from government-owned companies.

As per experts, many PSU companies have seen strong investor interest and significantly improved valuation in recent years on the back of strong earnings, creating a favourable ground for stake sales via OFS.

As a result, the government is monetising part of its large holdings in these PSUs to help bridge its revenue shortfall and manage its fiscal deficit.

Why is Govt. preferring OFS route for divestment?

The government is considering offer for sale (OFS) as the most preferred way to sell its minority stake in PSU as OFS are quicker to execute compared to strategic disinvestment which involves finding a buyer, due diligence, negotiations and regulatory approvals. The government can announce a floor price, offer shares through the stock exchanges and complete the OFS transaction within a few days.

Out of the nine OFS conducted so far in FY27, Life Insurance Corporation of India (LIC) OFS launched earlier this month was the largest as the government raised over ₹31,500 crore by divesting 6.5% stake after exercising the greenshoe option.

As per experts, the government will continue to conduct minority stake sales via OFS in the coming months of FY27 as well. However, specific timelines and company names are kept under wraps to prevent market disruption.

• To meet disinvestment target: The government is fast-tracking multiple OFS in FY27 to meet an ambitious ₹80,000 crore disinvestment and asset monetization target. The government has already mobilised around ₹55,000 crore through various OFS and has achieved nearly 70% of its asset-sale target.

  The Union Budget has set a high target for non-tax revenue through asset sales after falling short of its target in the last three fiscal years. Besides this, the ongoing West Asia crises has led to higher crude oil and fertiliser prices, leading to higher import costs. Hence, increasing the need for non-tax receipts to protect the government's fiscal deficit.

• To meet SEBI public shareholding norms: Another important factor divestment is SEBI’s minimum public shareholding (MPS), which requires all listed companies in India to maintain at least 25% of their total equity capital in the hands of public shareholders. Hence, selling part of its stake through OFS increases the proportion of shares held by public investors.

  For instance, The Indian government held a 96.5% stake in the Life Insurance Corporation of India (LIC) before the OFS held in August 2026, which reduced to a 90% stake after the OFS was completed. Similarly, government holding in Hindustan Copper reduced from 66.14% to 60.14% after OFS.

  Hence, the government is meeting the SEBI shareholding norms ahead of deadlines and also creating liquidity in PSU stocks by minority stake sale.

• Aggressive OFS push at FY27 start: The government has shifted away from its traditional strategy to launch major OFS transactions in the final month or quarter (Q4) of a fiscal year. Currently, DIPAM is fast tracking and aggressively brings new OFS every month in FY27 rather than waiting for year end.

  This strategy is to meet the target early and reduce the fiscal uncertainty and revenue pressure during the second half of the year. Also, in the last quarter of FY26 the market conditions were not favourable as benchmark NIFTY50 index fell over 14% due to the US-Iran war and higher crude oil prices which may have prompted the government to switch its strategy.

  So FY27 OFS push is primarily about government asset monetisation and unlocking value from its large PSU portfolio. However, these OFS creates additional supply of shares, which can put short-term pressure on the stock price, particularly when the floor price is set at a discount compared to current market price. But on the flip side, successful OFS also increase public participation and liquidity in PSU stocks.

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