Ennore Port, India?s only corporatised major port, is in talks with the Centre for an initial public offer (IPO) to raise funds for its expansion. The company is likely to offer only fresh shares to the public.
Post the issue, the Centre?s shareholding will fall from the existing 68%.
?The port requires funds for acquisition of land, rail & road connectivity, improvement of berths and dredging. But being a mini-ratna, it can not receive any financial support from the government. So, IPO is the best option for the company to raise money,? shipping secretary K Mohandas told FE.
Ennore Port has lined up Rs 1,600-crore capital expenditure programme for the next five years. The proposed projects include deepening of approach channel to 20 metres for handling capesize bulk carriers and building rail and road connectivity. It has only two shareholders?Centre (68%) and Chennai Port Trust (32%).
?The proposal has come up in informal discussion with the ministry but the port has to submit a definite plan before the ministry can take a call. Once the ministry agrees, the Disinvestment Department in finance ministry will take a view. The Cabinet Committee on Economic Affairs will take the final decision after that,? he added. When contacted, a senior official of Ennore Port said the company will take some time to finalise the proposal.
The secretary said the IPO was likely to come through fresh issue of shares and the Centre would not receive any money. ?It will not be in the form of disinvestment, but the government equity holding in the port will come down. The fresh issue of shares will increase the paid up capital of the company,? Mohandas said.
Stock market analysts said the government was s unlikely to allow Ennore Port to go for fresh issue alone.
?Most likely it will not be a fresh issue of shares only. The government will like to raise some money through the IPO as has been the practice in all disinvestment decisions taken recently,? SMC Capitals equity head Jagannadham Thunuguntla said.
He said even if the IPO was just a fresh issue, it could be termed as disinvestment on technical ground as the government share was diluted.
The Centre last week decided to sell 10% of its equity in Shipping Corporation of India through a follow-on public offer, in which the company will also issue fresh shares.
In a similar decision, the Centre has approved Steel Authority of India and Coal India to go for public offer of shares as it seeks to raise Rs 40,000 crore through disinvestment in 2010-11.
Kejriwal Research and Information Services director Arun Kejriwal said the IPO would help increase the networth of Ennore Port even as its shareholding expanded. ?Such an IPO has two benefits for the company. First, the entire money will go the company for its expansion and second, the networth will shoot up,? he said.