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Follow UsBy Arif Sharif
NEW DELHI: The Centre on Friday said it had sold a 51 percent stake in state-run computer software and maintenance firm CMC Ltd to Tata Sons for Rs 1.52 billion, breathing new life into its faltering privatisation programme. It also sold a 74 percent stake in state-run telecoms gear maker HTL Ltd, formerly Hindustan Teleprinters, to Himachal Futuristic Communications Ltd for Rs 550 million, an official statement said.
"The government today (Friday) approved induction of Tata Sons Ltd as a strategic partner in CMC Ltd, a central government company," the statement said. The sales are a shot in the arm for the government which is aiming to raise Rs 120 billion this financial year from stake sales in state-owned firms. Today's sales are the first the government has made this year.
The government got Rs 197 a share for CMC, 40 percent higher than its reserve price, but at a discount of 7.79 percent from its closing price on the Bombay Stock Exchange on Friday. Tata Sons was the sole bidder at the final stage of CMC's stake sale from an initial 14.
"Since the bid (by Tata Sons) was higher than the reserve price the cabinet decided to accept it," Disinvestment Minister Arun Shourie told a news conference. Sale of the unlisted HTL fetched the government Rs 550 million, or Rs 496 per Rs 100 share, which was nearly 42 percent higher than its reserve price of Rs 350.
Open Offer
Shourie said Tata Sons will also need to make an open offer to acquire an additional 20 percent stake at the average of CMC's share price over the previous six months. Under Indian takeover laws, any investor acquiring more than 15 percent of a company must make an open offer to the public shareholders to buy a minimum of 20 percent additional stake.
Shourie said the government, which currently holds 83.31 percent in CMC, will sell six percent to its employees. "Employees would have to pay only one third of the bid price or the market price, whichever is lower. This decision will apply subsequently to other cases also," he said.
Officials said the transfer of management of CMC Ltd to Tata Sons can take place the day the open offer is made. "All this can happen within a week and the two processes can happen almost together," disinvestment secretary Pradip Baijal said.
He said the buyers of the government stake would be locked in to CMC for a period of two years and in HTL for four. Shourie said the Cabinet Committee on Disinvestment had also decided to begin the disinvestment process in metals and steel consulting firm Metallurgical and Engineering Consultants India Ltd where it would offer 51 percent stake to a strategic partner and 10 percent stake to employees.
(C) Reuters Limited 2001.