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Panel calls for govt divestment from BHEL, 4 other PSEs

George Varghese in New Delhi

The Disinvestment Commission has recommended disinvestment of 20 per cent equity of the Bharat Heavy Electricals Limited to Indian and foreign financial institutions and suggested offer of sizeable equity of four other public sector enterprises to strategic buyers.

The other enterprises are Hindustan Insecticides Limited, Hindustan Organic Chemicals Limited, Rashtriya Chemicals and Fertilizers Limited and Rashtriya Ispat Nigam Limited.

The commission in its report submitted today to the government has recommended that the government should offer 51 per cent of the equity of HIL, RCFL and RINL and 33 per cent of HOCL to strategic buyers with managemenet control.

The commission said strong financial institutions should be inducted into BHEL as strategic partners to expand its international operations. Looking at the global trend towards consolidation in the power plant equipment industry, the commission said it would be desirable that BHEL remained an Indian company with a majority Indian stake.

There is a need for BHEL to continue to play an important role in the industry, considering the dominant market position it enjoys in the market and the expected substantial future growth in the infrastructure sector, the commission said.

Stressing the need for ensuring enhanced funding capability in rupee and foreign currency to enhance BHEL's competitiveness, the commission recommended that domestic financial institutions be offered equity stake of ten per cent and foreign private equity funds or financial institutions another 10 per cent in the company with appropriate role in management.

The government should enter into separate shareholder agreements with the strategic partners to ensure that, in case of their exit from BHEL, government's prior consent or first refusal is taken, so that the new buyer is also acceptable to the government, the commission said.

It said the requirements of SEBI Takeover Code, if applicable, should be observed. The acquisition from minority shareholders should be over and above the acquisition of shares offered by the government, it said.

In case of HIL, the commission said it would not serve any public interest if it continued under government ownership, especially when Indian agro-chemical market is fully contestable. HIL has a marginal share in the Indian agro-chemical market with seven large domestic and multinational manufacturers accounting for about 75 per cent of the market, the commission pointed out.

It recommended that the government should offer a minimum of 51 per cent of its equity to a strategic buyer along with management control to enable it to diversify its product range with new technology and additional investment.

The commission said 33 per cent of HOCL's equity out of the government's holding of 59 per cent be offered to a strategic buyer. The government could retain 26 per cent. The company also should initiate voluntary retirement scheme to reduce its manpower, the commission said.

In the case of RCFL, the commission recommended 51 per cent shares to be offered to a strategic buyer with management control. The selection of strategic buyer should be done through global competitive bidding.

The commission felt that it would enhance investor interest and valuation if the government could spell out its fertiliser policy and retention pricing mechanism before the strategic sale.

It recommended that the government should initiate the process of disinvestment of not less than 51 per cent of its remaining equity holding in RINL. The government should also write off the entire accumulated losses of RINL against its entire "share money pending allotment" and "preference share capital" and part of equity capital to keep the company from being referred to the Board for Industrial and Financial Reconstruction and to clean up its balance sheet, the commission said.

The commission regretted that the government decision was yet to come in 30 of the 53 units for which it had given recommendations. Of the 33 cases of strategic sale recommended by the commission, there was no decision in 23 cases. However, where decisions have been taken, the implementation has been extremely slow, it said.

UNI

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