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Govt may shed over 54% in SCI to keep it listed

S Ravindran in Mumbai

The Union government is contemplating shedding more than 54 per cent stake in Shipping Corporation of India in an effort to keep it listed.

Though its current plan is to dilute the stake in the corporation to 26 per cent from the present 80.12 per cent, a subsequent open offer from the strategic investor could bring the floating stock down to well below 10 per cent.

The government has said in the final draft of the shareholders agreement, "In the event the company is liable to get delisted, the government shall have at its sole discretion an option but not an obligation to ensure continued listing."

Sources in the divestment ministry said, "The option of the government diluting its stake further is being considered but it is not the only way ahead." They refused to spell out further details.

Shipping industry sources say that the present government move follows staunch protests from prospective bidders which requires the successful bidder to dilute equity further, post-divestment to about 64 per cent, to keep SCI listed.

Under the divestment plan, the government plans to sell 51 per cent to a strategic partner and another 3 per cent to its employees. The floating stock in the corporation is about 19. 88 per cent.

Under the Securities and Exchange Board of India guidelines, the new strategic partner will have to make an open offer for a further 20 per cent.

This could result in the floating stock falling to less than the threshold limit of 10 per cent and will lead to the corporation getting delisted.

Prospective bidders had argued that if they sell a part of their equity post-divestment, it would be considered as a distress sale by the market leading to low realisations. This in turn would result in their taking a hit on the books, which was unacceptable.

The government appears to have bought this argument by incorporating the latest clause, though a final decision has not been taken.

The Lazard India-SBI Caps combine is the advisor to the government on the sale process.

Essar Shipping, Great Eastern Shipping Company, the Videocon group and Sterlite are in the fray for acquiring SCI stake.

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