Govt invites bids for sale of its 63.75% stake in Shipping Corporation

The department has appointed RBSA Capital Advisors LLP to manage the strategic disinvestment, according to the advertisement. (Bloomberg)
The government has invited bids for its entire stake in the Shipping Corporation of India, paving the way for yet another privatisation of a state-owned company after BPCL.

The interested buyers will have to submit an expression of interest to acquire the government’s 63.75 per cent stake in the shipping company by February 13, 2021. Buyers can submit their queries to transaction adviser by January 23, said the preliminary information memorandum released by the government.

Shipping Corporation owns and operates a third of Indian tonnage, and has operating interests in all areas of the shipping business. The company has 6 joint venture entities, and four will be a part of the sale. These are India LNG Transport Co. (No.1) Ltd, India LNG Transport Co. (No.2) Ltd., India LNG Transport Co. (No.3) Ltd., and India LNG Transport Co. (No.4) Ltd. Of the other two joint ventures, Irano Hind Shipping Company is being dissolved, while SAIL SCIL Shipping Pvt. Ltd is in the process of winding off. One subsidiary, Inland & Coastal Shipping Ltd, will also be a part of the transaction.

Non core assets of the company are being hived off and will not be a part of the sale.

The government had approved strategic divestment of the company in November last year along with proposed privatisation of Bharat Petroleum Corporation Ltd and Container Corporation of India. The sale, if completed this year, would give some cushion to the government in divestment receipts as the Covid-19 pandemic has derailed its stake sale and privatisation plans. The government’s 63.75 per cent stake in the company was valued at Rs 2,535 crore.

The buyer, interested in acquiring the shipping company, must have a net worth of Rs 2,000 crore, and should have reported positive operating profit in at least three out of the last five financial years. Any public or private company, SEBI registered Alternative Investment Fund, or a company or fund incorporated outside India, is eligible to bid for the company. Employees can also participate in the transaction independently or by forming a consortium. Employees will have to incorporate an entity to complete the transaction that would be required to make 10 per cent contribution towards the financial bid.

Public sector companies are not eligible to participate in the transaction.

The buyer will be required to undertake obligations relating to employee protection, retirement policy including VRS, asset stripping, business continuity, lock-in period for shares, bearing Indian flag on vessels, which will be specified in the share purchase agreement. The company had 3,281 employees as on December 1, 2020.

Shortlisted bidders wanting to acquire the firm will receive RFP draft share purchase agreement in the second stage. Then financial bids will have to be submitted post after which a reserve price will be set. The highest bidder will be required to make an open offer to public shareholders to acquire a minimum of 26% shares of the company. The open offer cannot be made conditional on any minimum level of acceptance.

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