They were once known as India’s crown Jewels. But nearly 70 years after independence, many state-owned firms have lost some of their lustre. Not surprisingly, the government has put several poorly performing public sector companies on the block as part of a disinvestment programme that kicked off in 1991 after economic liberalisation and gathered pace between 2001 and 2004 when the BJP-led National Democratic Alliance was in power.

But the government’s disinvestment targets have proved elusive in recent years. Despite some big-ticket sales such as Maruti Udyog and Hindustan Zinc, India has managed to raise as much as it hoped just three times since 2001 and is on course to miss its target for the seventh straight year. Total disinvestment receipts for the current financial year stood at almost Rs 37,700 crore as of Feb. 14, way short of the goal of Rs 56,500 crore.

The state offerings have failed to whet investor appetite because of a lack of confidence in corporate governance and growth prospects. But the government doesn’t have a choice. It needs the money from disinvestment to help plug the yawning fiscal deficit, one of the widest in Asia, and sustain 7% growth. Prime Minister Narendra Modi’s aggressive spending plans to revive the economy have only fuelled the urgency.

The government might have failed to meet its disinvestment targets, but that hasn’t stopped the government from setting the bar even higher in the FY18 budget, which aims to raise Rs 72,500 crore through the sale of stakes in state firms. It’s an ambitious figure, as the government hopes to raise in just a year about a fifth of total disinvestment receipts of Rs 3.4 lakh crore since liberalisation in 1991.

Whether or not it’s a realistic target, the question is: Is investor distrust in state assets justified? To arrive at an answer, Fortune India examined the performance of 14 public sector undertakings in which the government offloaded its holdings to investors through initial public offerings between 2007 and 2012. The list consists of firms in a host of sectors, from energy and banking to infrastructure, and includes heavyweights such as Oil India, Coal India, and Power Grid Corporation.

The figures showed that the stock performance of 10 of the 14 companies was lacklustre, but their dividend payouts more than bridged those losses. At the end of January, the shares of nine companies were lower than their listing price and only four companies were trading higher than IPO levels.

There was just one standout performer: infrastructure company NBCC (India). It was trading nearly nine times higher than the price on the listing date. The company’s strong order book fuelled by the government’s housing and infrastructure projects has attracted investors.

Fortune India compared the amount of money the government garnered from the IPOs with the total dividend it earned as the largest shareholder over the years. A disclaimer here: The total dividends are compared to the first disinvestment receipts from the IPO, and subsequent stock sales aren’t included. Gross dividends are calculated by multiplying dividend per share by government shareholding, and adding up the amounts.

Overall, the government raised Rs 44,102 crore from the IPOs of these PSUs, but earned much higher dividends worth Rs 1.07 lakh crore over the years—a neat 2.4 times of disinvestment receipts in dividends. In only four cases, gross dividends were less than the disinvestment proceeds. Three of those four were state-run banks. The lowest dividend payer was Punjab & Sind Bank. The government netted Rs 480 crore from the bank’s IPO, while it earned only 45%, or Rs 212.02 crore, in cumulative gross dividends.

In four other cases, the cumulative gross dividend was in a higher range of 104% to 171% of the IPO proceeds, while six companies paid out double their IPO proceeds in dividends. Coal India and Power Finance Corporation are clear outliers. Through Coal India’s IPO, the goverment raised Rs 15,199 crore in October 2010, but its cumulative gross dividend added up to a massive Rs 57,853 crore, which is 3.81 times the IPO proceeds. In the case of Power Finance Corporation, the government has netted more than five times its IPO proceeds of Rs 1,145 crore.

Our analysis shows the biggest attraction of the government’s disinvestment programme is steady long-term returns from dividends. India is now preparing a plan for big-ticket asset sales that involves the disposal of controlling stakes in 22 listed and unlisted companies. The list includes large entities like Container Corporation of India, Bharat Earth Movers, three Steel Authority of India plants and unlisted entities like Cement Corporation of India. To attract investor interest, Modi is trying to improve governance and performance at state-owned companies.

However, Modi’s plans to offload a majority stake in a number of state companies to the private sector has drawn criticism from opposition parties and warnings from economists. With thousands of jobs potentially at risk, several trade unions have issued threats of nationwide strikes.

In a country with a tradition of socialist planning, disinvestment has always been a contentious issue. The government has forced its cash-rich companies to buy back shares, and also relied on bailouts from
Life Insurance Corporation to salvage open-market share sales. Essentially, the money which was in the company’s books finds its way to the government’s accounts. This strategy erodes the cash piles of healthier state-owned enterprises.

The ruling BJP, seen as pro-business, has always batted for disinvestment. Former journalist and World Bank economist Arun Shourie’s tenure as disinvestment minister in Atal Bihari Vajpayee’s government between 2000 and 2004 saw a massive privatisation programme, but Manmohan Singh’s Congress-led government put the brakes on disinvestment.

The Modi government has resuscitated the disinvestment plan but renamed the Department of Disinvestment as the Department of Investment and Public Asset Management (DIPAM), which suggests the government’s job is to create value, rather than sell assets. Niti Aayog, the body set up by Modi to replace the erstwhile Planning Commission, has identified the companies that will be put up for sale and is expected to work jointly with DIPAM to take the plan forward.

It isn’t clear whether the government will meet its targets, but here’s what we can tell you: Investors will pocket substantial returns if they’re willing to hang around.