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July 9, 2001
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Money > Business Headlines > Report July 9, 2001 |
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Ministry, divestment department split over SCI selloff modeS Ravindran The shipping ministry and the department of divestment are divided over the mode of divestment in Shipping Corporation of India. The ministry is keen on offloading a part of its stake to a strategic partner first, and later go in for a series of public floats. The divestment department, however, favours a public issue right away. "The ministry's contention is that offloading to a strategic partner first will enable price discovery. This in turn will help in realising a better price when a public float is made. On the other hand, the divestment department is keen on a public float as this will result in the process being completed faster," sources in the shipping industry said. Both the parties have, however, agreed that eventually government holding in the company should come down to the strategic 26 per cent. However, a senior official with the ministry declined to comment on the issue. Interestingly, shipping minister Arun Jaitley, who also holds the law, justice and company affairs portfolio, told newsmen on Saturday, after delivering the inaugural address at the 'national conference on development of ports and shipping', "We are in talks with the department of divestment. The option of a strategic sale as well as a public float is being considered." He declined to spell out anything further, including the timeframe for divestment. Industry sources said the ministry's fear was that an outright public float would result in a poor price realisation for the shipping giant, which posted a record net profit of over Rs 4 billion in 2000-01. Since shipping is perceived as a cyclical industry, there is little investor interest. Industry analysts point out that despite the boom in the industry, shipping company scrips were languishing at a price-to-earnings multiple of two. The average P\E ratio for all other industries is about 10. The SCI scrip closed at the Bombay Stock Exchange on Friday at Rs 30.30. The divestment department is keen on completing the divestment soon as it feels that the overall macro-economic objective of retiring the fiscal deficit through the divestment proceeds comes first. The government holds about 80 per cent in SCI. About 18 per cent is spread among financial institutions and mutual funds. The floating stock in the company is only 1 per cent. SCI, which has been identified as a core PSU, owns about half of the Indian fleet. Powered by YOU MAY ALSO WANT TO READ:
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