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P. Manoj

Investors holding the shares of India's largest shipping line are nibbling at their fingernails in suspense. Should they bite the bait and sell their shares during the open offer?

NEW DELHI, Oct. 22

SHIPPING Corporation of India (SCI) could well become the first public sector company to be delisted from the bourses as a fall-out of the proposed privatisation.

And, if this happens, the investors both retail and institutional would find themselves holding scrips, which have a value no more than a piece of paper in the absence of a proper forum for trading.

So, all eyes are on the impending open offer, that will follow the transfer of management control of SCI from the Government to the new private strategic partner, as per the take-over code framed by the market regulator, Securities and Exchange Board of India (SEBI).

Investors holding the shares of India's largest shipping line are nibbling at their fingernails in suspense. Should they bite the bait and sell their shares during the open offer?

And, what will happen to those who do not tender their shares during the open offer and continue with their holding as the possibility of SCI getting delisted from the bourses as a fall-out of disinvestment looms in the distance.

Anxiety has also spread among the SCI employees who are being promised stock option of 3.12 per cent shares having a lock-in period of one year for a smooth sailing of the privatisation process.

"If SCI is delisted, the stock options would remain a piece of paper in the absence of an exit option for the holders'', an SCI employee told Business Line.

The Union Government, on its part, has not given any clear-cut indication on whether it would ensure continued listing of SCI post-disinvestment.

The final draft of the shareholders agreement, which is being submitted to the Cabinet Committee on Disinvestment (CCD) for its approval, does not entail any obligation on the strategic partner for ensuring continuous listing of SCI.

However, the Government has retained the option to decide whether or not to offer any portion of its residual shareholding of 26 per cent to the public to ensure that SCI scrips remain listed on the stock exchanges.

"This option will be exercised by the Government at the time of the public announcement by the strategic partner under the SEBI take-over code'', the draft transaction document on selling 51 per cent of the Government's stake in SCI says.

As per the listing norms of SEBI, a company should have a minimum 25 per cent public holding for getting the shares listed on the bourses.

However, SEBI has made exemptions in the case of entities in the infrastructure sector and smaller Government companies. In the case of infrastructure companies, the minimum public holding has been set at 10 per cent.

While some smaller Government companies with public holding as low as two per cent have managed to get listed on the exchanges on the strength of the exemption given by SEBI.

SCI has a public holding of 19.88 per cent distributed among Unit Trust of India (11.74 per cent), GIC, LIC and other mutual funds (5.83 per cent), FIIs and other retail investors (2.31 per cent).

If any of these public and institutional shareholders tender their holdings substantially during the open offer, SCI scrip will fall below the minimum level required for listing and may be delisted.

This would make SCI the first public sector listed company to be delisted in the wake of privatisation.

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