DISINVESTING English meaning

Disinvestment got a much-needed boost during the Atal Bihari Vajpayee regime, when Arun Shourie was appointed the minister for disinvestments. Additionally, the government began disinvesting its stake in Maruti Udyog Ltd in 2002. In certain instances, the policies of the government may necessitate disinvestment in a particular business. A country may change its trade policy or curb imports of essential ingredients or components.

Many companies will use divestment to sell off peripheral assets that enable their management teams to regain sharper focus on the core business. Another example is a consumer products company selling off a profitable division that no longer meets its long range goals. The proceeds from this disinvestment are then used to improve the company’s financial position by reducing its debt. This assumption about the intent behind many divestment movements is often incorrect.

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The term has also been applied to actions targeting Iran, Sudan, Northern Ireland, Myanmar, Israel, and China. There is a separate department under the Ministry of Finance which handles all disinvestment-related works for the government. On 10 December 1999, the Department of Disinvestment was set up as a separate department and later renamed as Department of Investment and Public Asset Management.

For example, the Rockefeller Family Foundation, which derived its wealth from oil, divested its energy holdings in 2016 due to false statements from oil companies regarding global warming. According to a 2018 report by the Department of Investment and Public Assets Management, the Modi government has been responsible for over 2 lakh crore worth of disinvestments. Through disinvestment, the government of the day can spend the proceeds minimum wage in the united states for better purposes. The proceeds of the sale are channelised to the National Investment Fund, which was set up in 2005 as a corpus of permanent nature to help the government. Companies considered to be monopolies may be legally required to disinvest holdings to ensure fair competition. For example, after being found to be a monopoly after eight years in court, AT&T divested its seven regional operating companies in 1984.

Definition of Privatization

The policy shift may make the business unviable, resulting in a sale of stake or ownership. In other instances, the policy shift may make the business illegal and hence necessitate a liquidation of the business. The passage of this law was widely seen as a reprisal for an incident in which Cuban military aircraft shot down two private planes flown by Cuban exiles living in Florida, who were searching for Cubans attempting to escape to Miami. The Washington-based company was a manufacturer of paper and paper products until 2004.

• After disinvestment, AT&T retained its long-distance services, while the operating companies, referred to as the Baby Bells, provided regional services.
• If the difference in the profitability of the two divisions is large enough, the company may consider disinvesting (e.g. selling) the consumer division.
• The reasons for disinvestment could be a high cost of debt, ineffective management, liquidity issues, or any political reasons.
• Many companies will use divestment to sell off peripheral assets that enable their management teams to regain sharper focus on the core business.
• The term has also been applied to actions targeting Iran, Sudan, Northern Ireland, Myanmar, Israel, and China.

Since that year, it has divested operations by selling its pulp-and-paper manufacturing businesses to focus on real estate and timber. Privatization can take place in two ways, i.e. either by selling government-owned shares in an undertaking or lifting the restrictions that block private individuals and firms to take part in a particular industry. It also includes contracting out services provided by the public sector with private contractors. Finally, companies may engage in divestment for political and social reasons, such as selling assets contributing to global warming.

disinvest

Divesting a non-essential business unit can free up both time and capital for a parent company’s management to focus on its primary operations and expertise. For instance, in 2014, General Electric (GE) made a decision to divest its non-core financing arm by selling its shares of Synchrony Financial as a spin-off on the New York Stock Exchange. Divestment involves a company selling off a portion of its assets, often to improve company value and obtain higher efficiency.

This information should not be considered complete, up to date, and is not intended to be used in place of a visit, consultation, or advice of a legal, medical, or any other professional. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data. The fund manager manages the allocation to equity and debt in a dynamic manner and so the investor does not need to keep track of the asset allocation of the fund and does not have to carry out the rebalancing at his end. Divestment will typically take the form of a spin-off, equity carve-out, or direct sale of assets. These examples are programmatically compiled from various online sources to illustrate current usage of the word ‚disinvest.‘ Any opinions expressed in the examples do not represent those of Merriam-Webster or its editors.

Mutual fund Investments

It happens when more than 51% of the shareholding of the government is transferred to private hands. In March, the Modi government claimed that it exceeded its disinvestment target for FY19 by Rs 5,000 crore after total receipts touched Rs 85,000 crore. Myanmar (formerly Burma) has also been the target of disinvestment campaigns (most notably the Massachusetts Burma Law initiated by the state of Massachusetts). Divestment campaigns have also been directed against Saudi Arabia due to allegations of „gender apartheid“. The University of California, Riverside’s Hillel chapter has a Saudi Divestment petition circulating as of 2007.

Divestment is the process of selling subsidiary assets, investments, or divisions of a company in order to maximize the value of the parent company. Also known as divestiture, divestment is effectively the opposite of an investment and is usually done when that subsidiary asset or division is not performing up to expectations. One criticism of divestment focuses on the belief that institutional selling of a certain stock lowers its market value.

In simple words, Privatization implies the complete or partial sale of government’s equity in a state-owned undertaking, to the private sector. The process raises funds which could be useful for the expansion as per the existing business plan. Many conservatives opposed the disinvestment campaign, accusing its advocates of hypocrisy for not also proposing that the same sanctions be leveled on either the Soviet Union or the People’s Republic of China.

The movement spans 37 countries and has resulted in the divestiture of $6.2 trillion worth of assets, according to a September 2018 report from Arabella Advisors. One thousand institutional investors, including insurance companies, sovereign wealth funds, and pension funds, have committed to divest assets related to fossil fuels. The report attributes the surge in fossil fuel-related divestments to moral pressure that gave way to financial and fiduciary imperatives as the movement grew and stocks for major oil companies fell. Regardless of why a company chooses to adopt a divestment strategy, asset sales will generate revenue that can be used elsewhere in the organization.

This change has a great impact on government revenue, which can be positive or negative. The government, whenever it so desires, may sell a whole enterprise, or a majority stake in it, to private investors. In such cases, it is known as privatisation, in which the resulting ownership and control of the organisation does not rest with the government. The government mostly retains more than half of the stake in the public sector enterprise so that the control remains in its hands.

Disinvestment may also be due to inefficient manufacturing methods, outdated technologies, and so on. In many instances, disinvestment occurs as a policy decision of the government when a state government decides to transfer the ownership and management of undertakings to private hands. The reasons for disinvestment could be a high cost of debt, ineffective management, liquidity issues, or any political reasons. Disinvestment refers to an act of an organisation or the government of a state to raise funds by selling ownership stake. The sale can also be a liquidation of asset or stake in a subsidiary of an organisation or government undertaking.

Disinvestment targets are set under each Union Budget, and every year the targets change. The government takes the final decision on whether to raise the divestment target or not. A company may opt for the disinvestment of certain assets of a company it has acquired, particularly if those assets do not fit with its overall strategy. For example, a company focused on domestic operations may sell the international division of a company it has purchased, due to the complexities and costs of integration, as well as operating it on an ongoing basis. The strategy is commonly used by the government, by selling the shares of a Public Sector Enterprise (PSE) in which the government (centre or state) owns a majority stake, so as to raise funds.