The Hindu Business Line : Daewoo assets sale: CCEA okays ratio of sharing proceeds

IN a development that will pave the way for the sell-off of the assets of the erstwhile Daewoo Motors India Ltd, the Cabinet Committee on Economic Affairs (CCEA) today approved the ratio in which proceeds from the sale of the assets will be shared.

The decision is unprecedented, since it is almost certain that the Government would have to forego revenues due to it. On the other hand, lack of a clear decision on sharing the proceeds with lenders to Daewoo was holding up the sale of assets, which meant that neither the Government nor the lenders were in any position to recover their dues.

As per today's decision, proceeds from the sale would be shared in a 45:55 ratio between the revenue department (for the settlement of customs dues) and the lenders to Daewoo holders. The CCEA also gave its nod for the sale of the assets without insisting on the right to confiscate after sale. Further, it approved the writing off of the remainder of the principal amount and waiver of the interest and penalty accrued to facilitate sale of the assets of Daewoo without encumbrances, to contribute to better realisation of value from the sale.

"This will facilitate early sale of the assets which are depreciating rapidly, and to facilitate transfer of title to the goods without encumbrance and thereby contribute to better realisation of value from the sale of the assets," an official statement said.

Last year, General Motors had announced its intention to purchase Daewoo's assembly unit for making small cars in India. However, the company had said that it would go ahead with the purchase only if it were assured that the assets would be given free from any encumbrances. The carmaker has since indicated that its interest in the assets was waning due to the procedural delays and that it was studying alternative plans for rolling out its small car in India.

Daewoo's Surajpur facility, which has shut for four years, was not included in General Motors' 2001 takeover of South Korea's Daewoo Motor Co.

In fact, a recent attempt by the lenders, led by ICICI Bank, to sell Daewoo assets did not get any response. However, today's development might encourage more carmakers to enter the fray for the purchase of Daewoo's assets.

The Government's dues from Daewoo Motor India are primarily in the form of custom duty claims amounting to over Rs 1,000 crore and also dues resulting from alleged financial mismanagement by the company. The lenders too have claims of about Rs 1,000 crore.

While the two claims together work out to over Rs 2,000 crore, the reserve price set by the lenders for the sale of Daewoo assets was around Rs 1,100 crore when the bids were invited a few months ago. Moreover, General Motors is reportedly interested only in the assembly plant at the Surajpur works and not in the engine, transmission and axle plant.

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