Centre may sell 15% in Shipping Corp

The Centre has kicked  off the divestment process for the next fiscal year with the finance ministry circulating a Cabinet note for the sale of around 15 per cent stake in Shipping Corporation of India.

At present, the government holds an 80.1 per cent stake in the shipping company, while financial institutions, mutual funds (including UTI), banks and Life Insurance Corporation hold 7.6 per cent. Corporate bodies and NRIs hold 1.7 per cent and the Indian public holds 2.8 per cent.

The move to divest the government's holding in SCI comes despite the shipping ministry's opposition to reduce the government's equity below 75 per cent as the government stands to lose veto power.

"Even though our view on divestment is known, we are yet to finalise our stand on the issue," a shipping ministry official told Business Standard. The timeframe for the issue has not been set so far.

Officials said the rationale for going in for a 15 per cent sale was that the market would be unable to absorb a larger issue of shares. The offer is likely to lead to the sale of around 40 million shares.

Based on today's closing price of Rs 156.35 per share on the Bombay Stock Exchange and the National Stock Exchange, the government can hope to raise around Rs 625 crore from the sale of 40 million shares.

The government has not set any divestment target for the next fiscal year and is on course to meet its Rs 4,000 crore target for the current year, thanks to Rs 1,170 crore from the return of capital by Punjab National Bank.

For 2005-06, divestment proceeds will not accrue to the Consolidated Fund of India but go to the National Investment Fund to meet the spending needs on the social sector and to strengthen weak public sector companies.

The government is also looking at selling its stakes in Power Grid Corporation of India, Power Finance Corporation and Bharat Heavy Electricals Ltd in 2005-06. While the Centre hopes to ride piggyback on fresh issues by the two power companies, it is  looking to sell around a15 per cent stake in Bhel, where it holds 67 per cent.

Maruti Udyog Ltd and Balco are other companies on the divestment list.

The government is expected to wait till July to sell its stake in Maruti through the public offer route as it is bound by the shareholders' agreement to only sell its stake to Suzuki, the majority partner in the company. The Centre holds an 18 per cent stake in Maruti.

In the case of Balco, the government has to sell its residual 44 per cent stake in the company to Sterlite Industries, which acquired 51 per cent in the company.

The remaining 5 per cent is reserved for Balco employees. The valuation exercise for Balco is currently under way, with AF Ferguson entrusted with the task.  A proposal to sell the remaining 27 per cent stake in Jessop & Co is also under consideration.

Under the hammer

Divestment wish list for 2005-06: