Shipping Corporation of India (SCI) has indefinitely postponed its plan to pick up to 15% stake in a shipyard following a directive from shipping ministry.
The decision has been taken in the wake of SCI’s follow-on public offer to raise Rs 1,300 crore, half of which will go to the government for divesting 10% stake in the company.
The shipping company had prepared plans for forward and backward linkages, including entry in shipbuilding and port management. But the government is worried that if the company moves forward with the plan, the FPO may fail to attract the required interest from investors.
In order to meet its target to collect at least Rs 40,000 crore through disinvestment in 2010-11, the Centre wants SCI FPO to receive a similar interest as the initial public offer (IPO) of Coal India Ltd (CIL) has, government officials told FE on condition of anonymity. CIL’s IPO has been over-subscribed by 15.2%.
?We don’t want the company to do anything that will impact the FPO. Although the company is still exploring the opportunities in shipbuilding, we are concerned about the development,? shipping secretary K Mohandas told FE.
Another senior official in the ministry said on the condition of anonymity: ?At this time, we don’t want to do anything that will give signals, either positive or negative, to the market?. On being asked why should the government give directions against a decision taken by the board of a Navratna company, the official said: ?A Navratna company should not do anything that does not confine to the broad framework of its establishment?. Navratna status gives autonomy in decision making to a public sector company.
SCI had invited expressions of interest (EoIs) from domestic shipbuilders to sell a minority stake in September. It received EoIs from Bharti Shipyard, ABG Shipyard, Pipavav Shipyard and Goodearth Shipbuilders.
SCI chairman and managing director S Hajara said the purchase of stake would take time. ?Our efforts to enter shipbuilding business is at a nascent stage and even due diligence of yards expressing interest is yet to start. Hence our consideration of stake pick up is long way off and this has nothing to do with our FPO?.
The company’s share price had increased to its one-year high of Rs 202.50 on October 6, a day after the government gave nod for the share sale. Market analysts said a part of the rise in share price could be due to the fact that major domestic shipbuilders showed interest in selling stake to the public sector firm. Incidentally, the tender inviting EoIs from shipyards had closed on October 4. On Wednesday, the scrip fell 0.71% to Rs 182.10, taking SCI’s current networth down to Rs 7,711 crore.
On October 5, the government decided to offload 10% in SCI and allow the company to issue fresh shares equivalent to another 10% of the equity capital. The government currently holds 80.12% in SCI and after the FPO its shareholding will come down to 63.75%.
