Informist, Tuesday, Oct 12, 2021
By Sagar Sen
NEW DELHI - After selling Air India, the government now aims to conclude big ticket disinvestment in Bharat Petroleum Corp Ltd and Life Insurance Corp of India in the current financial year ending March, Department of Investment and Public Asset Management Secretary Tuhin Kanta Pandey said.
"We have some parallel transactions going on," Pandey told Informist in an interview. "Others which will probably come during this financial year are Central Electronics Ltd, BEML, Shipping Corp of India, Neelachal Ispat Nigam Ltd and Pawan Hans Ltd."
The government has already invited financial bids for Central Electronics and due diligence is going on for the remaining five public sector companies, Pandey said.
"As soon as the due diligence is completed, we will issue the request for proposal for financial bids," he said.
On the mammoth initial public offering of LIC, Pandey said, the government is working on a tight timeline and is aiming for a launch in the March quarter.
"Everything is very tight – the draft red herring prospectus is being written, accounts are being finalised, valuation is happening, but given the size of LIC, it will take time, but it is proceeding," he added.
A strategic stake sale in BPCL and an initial public offering in LIC are crucial for the government to meet its ambitious disinvestment target of 1.75 trln rupees for current fiscal.
The secretary also said the government is working on setting up a special purpose vehicle to monetise surplus land of public sector companies.
"The SPV will be an independent company, which will specialise in handling land and non-core asset monetisation. We are expecting it shortly," Pandey said.
Below are edited excerpts of Pandey's interview:
Q. After the successful disinvestment of Air India, which is the next big strategic sale that you are aiming to conclude?
A. We have some parallel transactions going on. Finance minister mentioned it in her Budget speech, we are working on all those transactions in parallel. Others which will probably come during this financial year are Central Electronics Ltd, BEML, Shipping Corp of India, BPCL, Neelachal Ispat Nigam Ltd and Pawan Hans. We are hopeful of concluding these transactions.
Q. In a number of cases you have already received initial bids, how soon can we see financial bids being invited?
A. Central Electronics, we have already reached the financial bidding stage. We are in due diligence phase in others. As soon as due diligence is completed, we will issue the request for proposal for financial bids.
Q. Can we expect financial bids being invited in big transactions like BPCL?
A. Yes, we are looking into it. I can't really tell which one will come. We are trying to do that, but we have to be sure that the due diligence process has been completed. We are dependent on the transaction advisor and the company to provide information and answer
queries.
The share purchase agreement also has to be finalised. That really doesn't take time. If you look at Air India, we closed financial bids on Sep 15 and in three weeks we concluded it. It will not take time because data is well analysed. We do not want any leakage or anybody to get any clue on that because we want it to be completely independent. They have to bid their best price--that is the message to the bidders.
Q. Can we still expect Container Corp of India's strategic disinvestment this year?
A. Container Corp is not happening this year. From expression of interest to conclusion, it takes about 9-12 months. We were hoping that the expression of interest will be issued, but that is linked to the land policy. As soon as we resolve that we will move forward. It is a policy issue at the hand of the railways. We have been requesting them. As soon as they do it, we will proceed.
Q. All eyes are on initial public offering of Life Insurance Corp of India, what is the status?
A. We will do it in the last quarter of the year. Everything is very tight, draft red herring prospectus is being written, accounts are being finalised, valuation is happening, but given the size of LIC, it will take time, but it is proceeding.
Q. Has the government decided on the proportion of stake to be sold through LIC IPO?
A. That is contingent upon the valuation that we are doing since the embedded value was not done by LIC earlier. Let us not move purely from the fiscal point of view. LIC, of course, is a very important transaction from the point of view of money. LIC and BPCL are two key transactions from the point of view of large proceeds. But every transaction is important to us from the point of view of reforms.
Q. Last year select public sector units were given asset monetisation targets through annual performance Memorandum of Understanding, has it been extended to cover more PSUs this year?
A. Memorandum of Understanding is being handled by Department of Public Enterprises, but I have been reviewing it also. I think there is a great deal of focus on it now. The Memorandum of Understanding system has also been revised and there are many suggestions that Department of Investment and Public Asset Management had made to be included like market capitalisation, asset monetisation plan, return on equity, asset turnover ratio. We said that these are the things that are market-linked. It is not merely enough to say we will do this much of production and this much of revenue. These key financial performance parameters show the responsibility and accountability to the markets and investors.
Q. How much progress has been made in setting up special purpose vehicle for asset monetisation?
A. We are working very hard on the special purpose vehicle, which will spur the non-core land monetisation. Many companies do not have the capacity to monetise land. The SPV will be an independent company which will specialise in handling land and non-core asset monetisation. PSUs will have to manage their core assets, we are talking about surplus land and assets.
Q. How soon will this special purpose vehicle be set up?
A. We are expecting it shortly, as soon as we get the Cabinet approval. We are waiting for Cabinet approval. Going forward, the Department of Public Enterprises will be entrusted with the actual asset monetisation.
Q. What is the progress in the case of IDBI Bank privatisation?
A. We are expecting the expression of interest by December, provided we get things sorted out with the Reserve Bank of India. We will be moving to the RBI on the proposed terms and conditions of expression of interest, which, if acceptable to the RBI we will be able to move forward. End
Edited by Vandana Hingorani
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