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SCI sale likely to net Rs 1,200 crore

Gaurav Raghuvanshi in New Delhi

Despite the downturn in the shipping industry, the government can look to fetch over Rs 1,200 crore (Rs 12 billion) from the sale of the Shipping Corporation of India. The price bids for the 51 per cent stake in the corporation are expected to be called in early September.

The average price of the SCI scrip for the last 20 weeks stands at Rs 80. It has recently seen active buying support. The market expects the successful bid to be at Rs 90 per share and the government's reserve price in the region of Rs 75-80 per share.

The inter-ministerial group would finalise the transaction documents this week, followed by the meeting of the Cabinet Committee on Divestment later this month to call the price bids, a senior divestment ministry official said. The home ministry is, by then, expected to give the security clearances to the bidders.

The government is planning to offload 51 per cent equity, or around 144 million shares, in SCI in favour of a strategic partner. As per the Securities and Exchange Board of India guidelines on divestment, the successful bidder will have to make an open offer for another 20 per cent stake held by small investors and financial institutions.

Based on the figure of Rs 80 per share, the reserve price for the 51 per cent equity works out to Rs 1,150 crore (Rs 11.50 billion), which implies that the successful bid would be in the region of Rs 1,200-1,300 crore (Rs 12-13 billion). The total acquisition cost for the strategic partner after the open offer could be above Rs 1,500 crore (Rs 15 billion).

The four prospective bidders -- Great Eastern Shipping Company, Essar Shipping, Sterlite Industries (with Varun Shipping as advisers) and BPL -- had firmed up funding of up to Rs 1,000 crore (Rs 10 billion), according to banking sources.

SCI reported a decline in net profit from Rs 383 crore (Rs 3.83 billion) in 2000-01 to Rs 242 crore (Rs 2.42 billion) for 2001-02.

In the first quarter of 2002-03, the company reported a loss of Rs 6 crore (Rs 60 million).

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