Now, PSUs to Rescue Government’s Failing Strategic Sale Programme

Subhash Narayan

(Subhash Narayan can be contacted at subhash.n@ians.in)

The government has decided to rely on cash-rich central public sector enterprises (CPSEs) to rescue its strategic sale programme, with tepid interest coming from the private sector to take over controlling interest in some of sick and loss-making companies.

DIPAM (Department of Investment and Public Asset Management) officials said that several proposals for sale of majority government holding in companies this year will be offered to willing CPSEs proposing to give a good valuation, for the Centre’s stake. This, officials believe, would eliminate the need to go through a complex sell-off process with no result coming at the end.

The change of stand follows a poor investor response to some of strategic sale initiatives undertaken by the disinvestment department recently. In the case of Pawan Hans Helicopters Ltd (PHHL), where the government offered to sell its entire 51 per cent stake to strategic investors last month, the bidding process failed to attract any investors, forcing four extensions so far in the date for submitting expression of interest.

Similarly, in the absence of bidders, the government is now looking to shut down Hindustan Prefab Ltd. rather than offering it to a strategic investor.

“Several of the sick and loss-making CPSEs suffer from closed-down operations and excessive manpower. If in some way these issues could be sorted out before an entity is put up under strategic sale route, the valuations and interest would be high. Getting PSU on board is a good plan, but government should allow its companies to take such investment decisions on their own rather than pushing them into taking any uneconomic move,” said a former Cabinet Secretary asking not to be named.

Sources said that the DIPAM is enthused by the recent Rs 4,800 deal struck between GAIL and an IL&FS subsidiary to take over the latter’s 874 MW of operational wind projects.

A core group of Secretaries has also favoured a plan for country’s largest power producer NTPC to take over the entire government holding in THDC India while hydro power major NHPC takes over the North Eastern Electric Power Corporation Ltd (NEEPCO).

More such options would be looked to bring several other strategic disinvestment proposals that have got delayed over lack of investor interest. In the list are companies such as Scooters India, Ferro Scrap Nigam, Bridge and Roof, Hindustan Fluorocarbons, India Medicines and Pharmaceuticals, Engineers Projects etc.

Officials believe that if PSUs are involved in strategic sale, it could provide synergy to existing operations of a state-run company, the sell off process would not only be smooth but government could also get better valuation for its shares.

The government’s strategic sale initiative has not taken off well as a few cases that were brought out under the plan failed to attract investors. Last year, Air India’s disinvestment bid had also fallen flat for want of bidders. Similarly, previous attempts to sell other loss making entities such as Scooters India, the makers of the popular Vikram brand of three-wheelers, have failed to move in the last one year.

DIPAM has drawn up plan for strategic sale in 35 PSUs, including Air India, Air India subsidiary AIATSL, the Dredging Corporation, BEML, Scooters India, Bharat Pumps Compressors, and the Bhadrawati, Salem and Durgapur units of steel major SAIL. While any PSUs interest in some of the companies on the strategic sale route is likely to be low, a few offers could be tempting for companies looking to expand their operations and scouting for suitable land for projects.

Companies such as Scooters India, Indian Drug and Pharmaceuticals Ltd (IDPL) and a few others are sitting on huge tracts of land that can be used by cash-rich PSUs to expand their own operations or carry out any diversification plan. IDPL is sitting on 834-acre of prime land in Rishikesh while Scooters India has about 150 acre of land near Lucknow.

However, not all cash-rich PSUs are happy about the government’s proposed plan. They feel that loss-making companies should not be imposed on them if it fails to attract any investor.

There have been examples how such acquisition plan have shaken even the most profitable and stable CPSEs. ONGC was a debt free company till it had to buy the entire government’s share in HPCL. Now the company is not only left with about Rs 14,000 crore of debt but its cash and bank balance plummeted to a mere Rs 167 crore in September 2018, down from Rs 9,511 crore just over a year back. Now if, Pawan Hans, (where ONGC also owns 49 per cent stake) is thrust upon it, the company without cash will have no other option but to borrow more from the market. (IANS)

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