Surojit Gupta & Shailendra Bhatnagar
NEW DELHI: The government on Wednesday moved closer to wrapping up stake
sales in overseas telecoms monopoly Videsh Sanchar Nigam Ltd. and oil marketing
firm IBP Co. Ltd., setting a January deadline for inviting price bids.
Disinvestment Minister Arun Shourie told reporters after a meeting of the
privatization panel the government had finalized the draft share holders'
agreement for both firms. "We will invite financial bids for VSNL by the
end of January," Shourie said, adding the government would stick to the
stake sale deadline.
Shourie also said the government would offer a 51 per cent stake in state-run
Shipping Corporation of India (SCI), the country's largest shipping company, for
sale. The government owns nearly 80 per cent in the shipping giant.
These big-ticket sales are a part of India's ambitious privatization drive
that seeks to raise Rs 120 billion in the current year. But global economic
uncertainty following the September 11 attacks on the United States has made it
hard to find buyers, further complicating the process suffering from stiff
opposition from labor unions and political parties.
VSNL shareholders’ agreement
Under the shareholders' agreement for the New York Stock Exchange listed VSNL,
the company would get a two-year preference over private players for being the
most preferred traffic carrier, based on price parity, from Bharat Sanchar Nigam
Ltd. and Mahanagar Telephone Nigam Ltd.
The government plans to cut its 52.97 per cent stake in VSNL to 26 per cent
by selling a 25 per cent controlling stake to a strategic partner and another
1.97 per cent to VSNL's employees.
Shourie said the government had incorporated a call option for the strategic
partner to enable it buy out the government's remaining stake after five years
in the cash-rich telecoms giant. "This indicates a road map for further
privatization of VSNL," Shourie said.
VSNL, which is also India's largest Internet access provider, holds some
1,400 acres of land in various parts of the country. But this, Shourie said,
would not be a part of the stake sale and added the government was keen to
demerge the land into a separate company ahead of VSNL's privatization.
"The bidders must know that the bidding is for VSNL's income stream and its
core assets, and not for the land," Shourie said.
IBP on the block
Shourie said the government also finalized the shareholders' agreement for
the 33.58 per cent stake in IBP, which has nearly 1,500 petroleum products
retail outlets mostly in the northern and eastern parts of India. The government
owns nearly 60 per cent in the firm.
Relaxing IBP's bidding rules further, Shourie said the strategic partner
would now have to invest Rs 20 billion in the hydrocarbon sector within 10
years, failing which a 25 per cent penalty would be imposed for each year.
Shourie said even state-run firms which had entered the bidding fray for the
government's stake would also have to make open offers to other shareholders as
per guidelines issued by the country's stock market regulator. The panel decided
to offload the entire 98.7 per cent government stake in Hindustan Copper Ltd.
after financial restructuring of the money-losing metals firm.
Shourie said the government would sell its remaining 26 per cent stake in
bread maker Modern Foods Ltd. to its current owner Hindustan Lever Ltd.
The panel fine-tuned the privatization guidelines for state-owned hotel
properties, and decided to invite fresh bids for some in the absence of any
buyers.
(C) Reuters Limited.