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HMT strategic sale put on hold: Vikhe-Patil

Fakir Chand in Bangalore

In a surprising move, the heavy industries ministry on Friday deferred the strategic sale of Bangalore-based HMT Ltd, one of India's largest public sector units.

Coming as it does nearly a week after the Union government decided to postpone strategic divestment in the petroleum sector, the decision to put off HMT's divestment for the time being was taken by Union minister for heavy industry and public enterprises Balasaheb Vikhe-Patil after a day-long meeting with its management and labor unions in Bangalore on Friday.

Later, at an impromptu interaction with media, Patil said the ministry was now in favor of divesting HMT's government stake to the public through a fresh issue instead of the strategic route that was taken earlier.

Though HMT is a public listed company and its shares are traded on the BSE, the holding of the public constitutes a mere 1 percent, with most of it with institutional players, and only a few high net worth individuals.

Meanwhile, the ministry is considering pumping Rs 20 crore (Rs 200 million) in HMT's watch division to revive it. Plans are also under way to grant additional funds to upgrade its obsolete technology in the machine tools' division.

The ministry has also received a memorandum from HMT's labor unions for a universal voluntary retirement scheme to exit on favorable terms. So far, about 5,000 employees have left the company during the last couple of years.

"Though we have received a couple of bids for selling the government's controlling stake in HMT's subsidiaries, the ministry is having second thoughts on the strategic divestment route adopted earlier, and weighing various other options/models, including going to the public to realize maximum value for its shares," Patil claimed.

It may be recalled that the Rs 500-crore (Rs 5 billion) diversified engineering conglomerate manufactures a range of products such as watches, machine tools, tractors, bulbs, and bearings, invited preliminary bids for selling its controlling stake in four of its six subsidiaries in July this year.

The four subsidiaries that were put on the block for selling the government's 74 per cent stake each are HMT Machine Tools Ltd, HMT Watches Ltd, HMT Bearings Ltd, and HMT Chinar Watches Ltd.

Ironically, only a couple of bidders had filed expressions of interest last month. Though Patil refused to divulge details on the offer price of the bidders, and whether it was below the expectations, he surprised the media by saying that HMT had not even fixed the reserve price.

Patil, a Shiv Sena MP, who succeeded another party member and Lok Sabha Speaker Manohar Joshi, in the ministry has expressed reservation against strategic divestment of HMT's shares to avoid creating monopoly by the private sector companies.

Favoring greater participation and involvement of the public, Patil said to realise the real intrinsic value of the government investments in the public sector, it is the people who should decide what should the value and price of each such enterprise.

Two years ago, HMT had retained its profitable tractor division, while spinning off its other businesses into subsidiaries.

Asked whether the ministry had worked out a timeframe for selling the HMT stake either through public or the strategic route, Patil told rediff.com that the government would decide the sell-off at the appropriate time as the current market conditions were not favorable due to fluctuations and bearish sentiments.

"We are not talking of only HMT's divestment. There are, in all, 49 public sector units, including 7 units, which are shut down, and another 15 sick units, which have been referred to the Bureau of Industrial and Financial Reconstruction, and the remaining 27 units, which are working well.

Keeping in view the overall interest of 12,000 employees, the company's assets across the country, Patil said the ministry was evaluating an appropriate strategy to sell off its controlling stake, preferably through direct offer to the public.

HMT Watches is one of India's earliest watchmakers, while, HMT Bearings makes ball bearings used in engineering, automobile and defence products. HMT Chinar Watches has an assembly plant at Srinagar in Kashmir.

The over four-decade-old public sector enterprise has two other subsidiaries HMT International and Praga Tools Ltd, located in Hyderabad.

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