Disinvestment tricks

The Kelkar committee’s report on fiscal consolidation contains two interesting suggestions to revive the stalled disinvestment programme. Both are innovative examples of financial engineering. The first, a “call option model”, requires the Centre to offer the shareholdings targeted for disinvestment over a period of, say, three months. Investors would be sold call options on those shares at various strike prices and expiry dates. As with any option, the premium is forfeited if the option expires unexercised.

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