Tuesday, February 10, 2015

Disinvestment

Share it Please
Investment can be thought as the conversion of money into securities / assets (you invest in some company, means you use your money to buy some security, like shares, bonds, debentures, etc.)

Conversely, Disinvestment can be thought as the conversion of securities / assets into money.

Generally, disinvestment is the action of an organization, or government, selling its asset (may be shares, or stocks, or any other security) or its subsidiary. In return, the organization or government gets, or raises money, which it can use for other purpose.

Example
Currently, the government sold 63.16 crore shares (10 % stake) of Coal India Limited (CIL) on January 30, 2015, reducing government stake in CIL to 79.65 % (from 89.65 %). By this disinvestment, government raised Rs. 22,558 crore. (meaning, government sold some of its shares, and raised money against it)

Why Disinvestment by government?
  • Financing the fiscal deficit (to reduce it)
  • Financing large-scale infrastructure development
  • To reduce government debt
  • Any other purpose

If you like reading this blog, please like and share

Happy learning!

No comments:

Post a Comment