New Delhi: Finance Minister Nirmala Sitharaman Wednesday announced the union cabinet’s decision to sell government’s strategic stakes in five public sector firms — Bharat Petroleum Corporation Limited (BPCL), Container Corporation of India (CONCOR), Shipping Corporation of India (SCI), THDC Ltd and North Eastern Electric Power Corporation (NEEPCO) — along with handing over management control of these companies to the buyers.
While a bidding process will be followed for BPCL, CONCOR and SCI, THDC Ltd and NEEPCO will be sold to another state-owned firm National Thermal Power Corporation (NTPC).
The government aims to collect Rs 1.05 lakh crore from disinvestment in the current fiscal. But so far, it has collected only Rs 17,000 crore through this route, making it essential for the government to push through these sales in the current fiscal itself.
With only over four months left for the end of the current fiscal, ThePrint looks at the process the government will follow to sell its stakes.
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Appointment of asset valuers, transaction & legal advisers
With the cabinet approving the strategic stake sales, the department of investment and public asset management can fast track the process of appointing advisers for the deals.
The government had floated a Request for Proposal for asset valuers, transaction advisers and legal advisers for the five companies last month without mentioning the names of these firms as the cabinet approval was still pending.
The last day for submitting the technical bids was extended to 25 November. The bids will be opened the same day. After the government opens the bids, the shortlisted companies will be finalised based on their financial bids.
Valuation
The government proposes to give the valuers 30 days to submit their detailed report with the fair market valuation of these firms. Three of the five firms lined up for strategic sales are listed companies.
According to the current market capitalisation of these firms as on 22 November, the government’s proposed sale of its entire 53.29 per cent shareholding in BPCL is valued at around Rs 59,000 crore. It’s entire 63.75 per cent shareholding in SCI is valued at around Rs 1,800 crore and 30.8 per cent of its 54.8 per cent shareholding in CONCOR is valued at around Rs 10,500 crore.
However, since the government will give up management control to the buyers, it is also likely to charge a substantial amount in control premium over and above the market capitalisation of its shareholding.
Economists peg that the government may get revenues in excess of Rs 90,000 crore from the sale of the three listed companies.
Bidding process
Once the government receives the valuation of the firms, it can start the process of finalising the bid documents for the sale. The government is likely to invite expression of interest from buyers and give them around 45 days to submit their technical bids.
It may take another two weeks for the shortlisted bidders to submit their financial bids. A reserve price will be set based on the valuations arrived at by the asset valuers.
A government official, who did not wish to be named, told ThePrint that it is possible to complete the entire disinvestment process within this fiscal, especially because the finance ministry had gone ahead and invited bids for advisers even before receiving the cabinet approval.
Another added advantage is that the firms, especially BPCL, are likely to attract many companies, he said.
BPCL, an oil marketing company, has seen interest from many foreign oil companies looking to capitalise on the firm’s refining capacity and its large fuel marketing infrastructure in India.
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