Financial Daily from THE HINDU group of publications
Wednesday, Apr 10, 2002
Industry & Economy - Disinvestment
Logistics - Shipping
Iffco-Kribhco queer pitch for SCI bidders
P. Manoj Harish Damodaran
NEW DELHI, April 9
THE wild card entrant Iffco-Kribhco pair has created a flutter among the established players in the shipping sector who are keen on acquiring the controlling stake of 51 per cent in Shipping Corporation of India (SCI) being put up for sale by the Government.
Private sector shipping lines fear that the cash-rich co-operative fertiliser team would give them a run for their money when the Government calls for price bids for the strategic sale of SCI, according to industry sources.
As on March 31, 2001, Iffco had reserves and surplus of Rs 2,147 crore, while that of Kribhco was Rs 1,492 crore.
Apart from their huge combined reserves, the two co-operatives also have tremendous leveraging capacity on account of their low debt-equity ratios. Kribhco is also a zero-debt entity.
"Iffco-Kribhco has created a fear psychosis amongst other bidders," an official with one of the bidding companies said.
Unlike Indian Oil Corporation's (IOC) successful bid for IBP Co Ltd , the bid of Iffco-Kribhco combine for buying SCI is being viewed as "totally unrelated to and outside their core business" by the other contenders.
Though metals major Sterlite Industries Ltd, appliances maker Videocon International, electronics bigwig BPL and cable-maker Finolex group had also entered the fray for buying SCI, it could be argued that these were private entities and not PSUs, the sources said.
"The acquisition of a state-owned company by another public sector company cannot be strictly called privatisation. Though IBP was sold to IOC, the Government has now admitted that allowing PSUs to buy other PSUs is a mistake," the sources pointed out.
While the Cabinet Committee on Disinvestment (CCD) had decided to ban IOC from bidding for HPCL and BPCL when these oil companies are put up for sale, the Disinvestment Ministry feels that PSUs should be kept out of the bidding process altogether.
Officials representing some of the bidding companies indicated that the issue of allowing Iffco-Kribhco to bid for SCI would be raised at the pre-bid meetings to be held shortly with the Government.
But, the Iffco-Kribhco team is not dismayed with the argument put forth by the rival bidders, stating that they have no business to question the Expression of Interest (EoI) submitted by the fertiliser co-operative major.
"Who are they to question our right to bid? This is a decision taken by our elected boards. It is for our boards to decide which business to enter into," Mr U.S. Awasthi, Managing Director, Iffco, told Business Line.
Mr Awasti made it clear that the purpose of Iffco-Kribhco's bid for SCI was not to create synergies with their existing fertiliser business. "Our main aim is to expand our horizons by entering into new business ventures and utilise the huge reserves profitably," Mr Awasthi said.
"Our rivals should know that we are not strictly PSUs, but co-operatives. We are even willing to return Government equity," Mr Awasthi noted.
However, having cleared the pre-qualification of Iffco-Kribhco on the basis of the net worth criteria of Rs 800 crore, the Union Government will now find it impossible to disqualify the co-operative fertiliser team.
"Iffco-Kribhco can go to court in such an event, derailing the disinvestment process in SCI by at least a couple of months," the sources said.
Great Eastern Shipping Company Ltd, Essar Shipping Ltd, Malaysia International Shipping Corporation Bhd, CMA-CGM, OOCCL and Aban Lloyd have also been shortlisted by the Government for participating in the bidding process.
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