Budget 2026: Disinvestment targets to remain conservative in FY27 as focus shifts to value creation

The government is likely to set a disinvestment target of ₹45,000-50,000 crore for the next fiscal year, broadly in line with the ₹47,000 crore budgeted for the current year, even as actual receipts remain well below estimates, brokerage reports said.

The reports suggest that disinvestment is unlikely to emerge as a major fiscal lever in the near term, as the government’s focus is on value creation - through operational autonomy, governance reforms and best practices - before any meaningful equity dilution.

“Budgetary allocation towards divestment is unlikely to change dramatically for FY27. We expect a marginally higher allocation of ₹50,000 crore under ‘miscellaneous receipts’ in the upcoming year,” JM Financial said in its “Union Budget Preview” report.

In FY26, against a budgeted allocation of ₹47,000 crore under miscellaneous receipts, actual disinvestment proceeds stood at just ₹8,800 crore as of January 22, 2026. JM Financial said this underscores the government’s current emphasis on value creation through operational autonomy, governance reforms and best practices before undertaking meaningful equity dilution.

Missed targets a recurring trend

Historical data compiled by the brokerage showed that disinvestment receipts have consistently trailed budgeted estimates over the past several years. After overshooting targets in FY18 and FY19, collections weakened sharply, with actual receipts falling well short of expectations from FY20 onwards. In FY21, the government realised ₹32,900 crore against a budgeted ₹1.2 lakh crore, while in FY22, receipts slipped further to ₹13,500 crore against a target of ₹75,000 crore.

Although disinvestment collections improved to ₹35,300 crore in FY23, they again moderated to ₹16,500 crore in FY24 and ₹10,200 crore in FY25, amid delays in large-ticket stake sales and a growing reliance on dividends and small offer-for-sale transactions. The trend has continued in FY26, with receipts remaining subdued despite a relatively modest target.

Momentum in PSU listings has slowed

Ambit Capital, in its pre-Budget report, said that while the current government pushed PSU listings aggressively in its first term, momentum has slowed sharply in recent years. When the government came to power in CY14, the Centre owned 234 operating CPSEs, of which 46 were listed. Over the next six years, the number of listed PSUs rose to 58 by FY20. However, since then, disinvestment has largely stalled, with the government achieving only around 18% of its cumulative disinvestment target since FY21.

Ambit Capital pointed out that although the Centre announced an ambitious disinvestment plan in FY21 aimed at reducing its presence across sectors, the messaging has since evolved. In August 2024, the Department of Investment and Public Asset Management (DIPAM) indicated that the focus should be more on dividends than on disinvestment.

IDBI Bank stake sale on cards

That shift has translated into limited deal activity. The government is currently looking to sell around a 30.5% stake in IDBI Bank , which could help it meet its ₹47,000 crore disinvestment target, although some reports suggest the transaction could spill over into the next financial year.

If executed, it would be the first major disinvestment by value since the LIC IPO in FY23, which raised ₹20,500 crore, with recent years largely seeing small-ticket stake sales through offer-for-sale routes.

Motilal Oswal expects disinvestment targets to remain conservative. The brokerage assumes a target of ₹45,000 crore, marginally lower than last year’s ₹47,000 crore. It said the government’s PSU strategy is evolving away from outright asset sales towards business revamps and selective stake monetisation. This includes the restructuring of IDBI Bank, potential stake changes in LIC, and consolidation of smaller PSU banks to create stronger entities along the lines of SBI and HDFC.

Motilal Oswal added that there are about 12 PSU banks currently on the government’s radar, with discussions centred on mergers of smaller banks to strengthen balance sheets and support long-term growth. At the same time, traditional focus areas such as defence, nuclear, electronics and power are expected to continue receiving strong budgetary support under the broader structural reform agenda.

Market volatility a key hurdle

According to the SBI Ecowrap report, market volatility itself could prove to be a deciding factor for disinvestment, suggesting that large-ticket stake sales may remain challenging in the current environment.

Echoing the cautious outlook, JM Financial said disinvestment has historically not been a core component of fiscal management, with realisations consistently trailing budgeted targets since FY20. The brokerage noted that this deprioritisation is reflected in the removal of a standalone disinvestment head from government financials, with proceeds now included under “miscellaneous receipts”.

It also flagged moderation in dividend inflows as a potential fiscal challenge, noting that dividends from 30 PSUs stood at ₹49,600 crore in FYTD26 (April–January), compared with ₹74,100 crore received from 32 PSUs in FY25.