Indian Government Set To Extend Shipping Corporation’s EOI To March 1

On December 22, 2020, DIPAM, the government’s asset sale department, invited expressions of interest to privatise Shipping Corporation by selling the government’s 63.75 per cent stake to a strategic buyer.

DIPAM had set a 13 February date for potential bidders to file their interest.

Government officials briefed on the move said the deadline is also being pushed back due to a delay by the SCI management in hiring a consultant for undertaking de-merger/disposal of its non-core assets (real estate) ahead of the sale and to carry out corporate restructuring for better operational performance of the navratna company.

The corporate restructuring being planned involves de-merging whole or part of a division of SCI as identified by the management. The de-merged part may be merged with an existing subsidiary or hived off as a new subsidiary created for the purpose.

“The data that has come out in the preliminary information memorandum is very sketchy, there is a lot more data that we need to see,” said an executive with a company weighing a bid for SCI.

The government has also not clarified how the de-merger of real estate will be done and in what form, aside from saying that it will be kept out of the deal.

“While placing a price bid now, will I have to include the real estate and later the government will return that portion or how does it happen. This is important because then the deal size increases,” an executive with another entity planning a bid for SCI said.

Recalling the de-merger of the real estate of erstwhile Videsh Sanchar Nigam Ltd (VSNL), which was sold to Tata Communications Ltd in 2002, the second executive said: “The final demerger happened after 17 years in 2019. These are the issues that need to be answered, there should be greater clarity in what form this will be done”.

If the price bid is allowed to be submitted at ex real estate, which will be lower than the prevailing market price, the mandatory open offer that follows will have to be at the market price only.

“This is a basic point. If the government says you don’t have to pay for the real estate today, you subtract and then put in the bids, but the open offer is always at the prevailing market price. Why will a shareholder tender shares at a price lower than the market? Otherwise, the government will have to split the company before the sale and give every shareholder two shares, one with real estate and one with shipping. All this needs a long process. That’s why we need clarity and how it will be done,” the second executive added.

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