Kotak AMC Managing Director Nilesh Shah has revived the debate around public-sector privatisation by holding up Hindustan Zinc as a model for how the government can unlock value without fully exiting a strategic asset. Speaking in the context of the Centre's ongoing divestment agenda, Shah argued that a well-structured sale, followed by the retention of a minority stake, can preserve upside for the state while transferring operational control to private hands.
Value Creation Model
Shah's central point was not simply that the government should sell assets, but that it should sell them intelligently. In his view, Hindustan Zinc demonstrates how a strategic divestment can create long-term national wealth if the state retains a residual stake in a business that continues to grow after privatisation. He said the government's remaining holding in Hindustan Zinc is now worth more than Rs 62,000 crore, underscoring how a partial exit can still leave the public sector with a valuable financial interest in the company's future.
The example is significant because it reframes privatisation from a one-time fiscal transaction into a long-duration wealth creation strategy. Rather than treating disinvestment as a simple cash-raising exercise, Shah's argument suggests that the state can benefit twice: first through proceeds from the sale, and later through appreciation in the value of the retained stake. That logic, he said, should inform the approach to IDBI Bank, one of the most closely watched transactions in the government's privatisation pipeline.
IDBI Bank In Focus
IDBI Bank has long been viewed as a test case for the government's ability to execute a complex financial-sector divestment. The transaction has drawn attention because it involves not just a sale of equity, but also questions around control, governance, and the future role of a lender that has spent years under public ownership and regulatory scrutiny. Shah's comments place the bank squarely within a broader policy debate about whether India should continue to hold on to underperforming state assets or use market mechanisms to unlock value and improve efficiency.
His remarks also reflect a wider shift in the policy conversation. For years, privatisation in India has often been discussed in binary terms: either the government keeps an asset or it sells it outright. Shah's Hindustan Zinc example suggests a more nuanced framework, one in which the state can reduce ownership, transfer management responsibility, and still remain a beneficiary of future growth. That approach may be politically and fiscally more sustainable, particularly at a time when the government faces competing demands on public spending.
The IDBI Bank transaction is especially important because it sits at the intersection of fiscal policy and financial-sector reform. A successful divestment could not only generate receipts for the Centre but also signal confidence in India's ability to manage complex ownership transitions in banking. It would also test investor appetite for a lender with a legacy public-sector structure and a history that has required careful regulatory handling.
Broader Fiscal Signal
Shah's comments arrive at a time when the government continues to search for ways to widen its fiscal room without relying excessively on borrowing. Disinvestment proceeds have historically been an important, though uneven, source of non-tax revenue. But the quality of those proceeds matters as much as the headline number. A sale that leaves the state with a valuable minority stake, as in Hindustan Zinc, can potentially outperform a full exit if the underlying business appreciates over time.
That is why the Hindustan Zinc comparison resonates beyond a single company. It speaks to a larger policy question: whether India should treat strategic divestment as a mechanism for permanent capital recycling. If the retained stake rises in value, the government effectively converts an ownership reduction into a continuing asset. Shah's hope is that IDBI Bank could follow a similar path, delivering not just immediate proceeds but a durable financial gain for the public balance sheet.
For policymakers, the lesson is clear. Privatisation is not merely about shrinking the state; it is about structuring exits in a way that maximises long-term public value. Hindustan Zinc, in Shah's telling, offers a blueprint. The question now is whether IDBI Bank can become the next example of that model in action.