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P. Manoj

NEW DELHI, Feb. 21

RUIA Coatex, promoted by Mr Pawan Ruia, Kolkata-based chartered accountant, is set to acquire a controlling stake of 72 per cent in Jessop & Company Ltd, a subsidiary of Bharat Bhari Udyog Nigam Ltd.

The company is engaged in the design and manufacture of a diversified range of products such as railway rolling stock, earth moving equipment, cranes, structural fabrication, hydraulic gates and paper machinery.

"The price quoted by Ruia Coatex was the highest when the bids were opened by the Government last Saturday," Government sources familiar with the developments told Business Line. In the process, Ruia Coatex outbid Titagarh Industries Ltd.

The Cabinet Committee on Disinvestment (CCD) is expected to meet sometime next week (probably February 27) to clear the bid of Ruia Coatex. The price quoted by Ruia Coatex is higher than the reserve price set by the Government, the sources said.

Subsequently, the Union Government will approach the Board for Industrial and Financial Reconstruction (BIFR) seeking its approval to finalise the deal. Jessop & Company Ltd was referred to the BIFR on turning sick.

"Those who are opposing the deal can air their grievances before BIFR," the sources said.

Though the company has huge assets, it is incurring loss of Rs 44 crore a year. "If we do not privatise the company now, its networth will become worse. In any case, the new private owner will not be allowed to strip the assets including the land owned by the company as per the shareholders agreement," the sources said.

The Government will hold 26 per cent stake in Jessop & Company following privatisation. The shares of Jessop & Company are listed on the Calcutta Stock Exchange, but the trading is infrequent since the free float is less.

About two per cent of Jessop's shares are held by private individuals and the rest is owned by the Union Government. The stock price is currently hovering at around Rs 8 per share.

This will be the first company in the heavy engineering sector (and a sick company that too) to be successfully privatised by the Union Government. As on March 31, 2001, the company's net worth was a negative Rs 270 crore.

In January, the CCD had cleared a financial restructuring package for Jessop & Company involving writing off/waiver of Government loans and infusion of fresh funds. However, this will be implemented only upon successful privatisation of the company.

Besides, the Government has also decided to extend purchase price preference to Jessop & Company for two years after privatisation. Such preference will be in the form of orders for building 36 EMU coaches per annum for the Indian Railways as well as a wagon order reservation of 8 per cent out of the PSU quota.

The purchase price preference will, however, be subject to the company matching the price of the lowest bidder in the open tendering process.

With the company in BIFR net, the Union Government had sought a special permission from the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) to carry out the process of privatisation of Jessop & Company.

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