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Public offering likely in Shipping Corp divestment

Mamata Singh and Anil Sasi

The government is likely to go in for a public offering for divestment of its equity in Shipping Corporation of India (SCI) rather than look for a strategic partner as was decided earlier.

The Department of Divestment has started the process of consultations with the Ministry of Shipping prior to preparing a cabinet note on the process to be adopted for divestment.

This would imply a reversal from the earlier decision of the Cabinet Committee on Divestment, to sell 40 per cent stake to a strategic partner.

Currently, the government owns 80 per cent equity in SCI. Banks, other financial institutions, mutual funds and private investors own the other 20 per cent.

The decision on divestment in SCI is to be taken this fiscal as the shipping business is very cyclical, and the government will wish to make use of the current buoyancy in freight rates, say officials.

Even a demerger would not be feasible, something which had been recommended by PricewaterhouseCoopers and rejected by the government. It felt this would delay the process as it would create some unviable demerged sections like container business, in which SCI is not very strong.

"The possibility of diluting the government's stake in SCI through small offerings of between 5-10 per cent in the market appears feasible, especially in light of the recent spurt in the company's share prices," a ministry of shipping official said.

SCI has ended the year on a high note, registering a record net profit of Rs 4.01 billion for fiscal 2000-01. The company's shares, therefore, are expected to fetch a good premium in the market, say shipping officials.

The public offering route say officials is the best bet for a company of SCI's, as it will be difficult to find a strategic partner who can pick up substantial stake in such a large company. Also, the public would get a chance to benefit from the divestment programme.

SCI is the largest shipping company in the country and carries as much as 44 per cent of the total tonnage, followed by Great Eastern Shipping Company and Essar Shipping with a 12 per cent and 8 per cent share respectively. The company is also focusing on the LNG business through a joint venture with Mitsui, Japan and ACFI, US.

SCI also provides shipping services including freight, charter hire, liner, container, breakbulk and related services. The company operates and manages a fleet of line vessels, tankers, bulk carriers, passenger vessels and offshore vessels.

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