FinMin invites EoI for privatization of Shipping Corporation of India

 Mint

December 22, 2020


The finance ministry on Tuesday invited expression of interest (EoI) for strategic disinvestment of its entire 63.75% stake in Shipping Corporation of India Ltd (SCIL) along with transfer of management control. At current market price, government can raise around ₹2500 crore from the stake sale.

As the country’s premier shipping line, SCIL owns and operates around one third of the Indian tonnage and has operating interests in practically all areas of the shipping business servicing both national and international trades. SCIL is primarily engaged in the activates of transporting goods and passengers with its own fleets including bulk carriers, crude oil tankers, LPG carriers, product tankers, container vessels, passenger cum cargo vessels and offshore supply vessels. Government has appointed RBSA Capital Advisers as transaction adviser to manage the strategic disinvestment process. The last date for submission of EoI is 13 February.

In 1992 government divested 18.51% of its shareholding in the company in favour of financial institutions, mutual funds and banks and subsequently in the same year, the equity share of the company was listed stock exchanges. In 1994, government further divested 1.37% of its holding in SCIL. In 2000, government declared the public sector undertaking a Miniratna and upgraded it to a Navratna in 2008, thus enhancing the company’s powers for capital investment. In 2010, government sold 16.37% stake in the public sector undertaking (PSU) to bring down its shareholding to 63.75%. The PSU earned a profit of ₹336.5 crore in FY20 with total income of ₹4668 crore.

The Department of Investment and Public Asset Management (DIPAM) said the interested bidders should have positive EBITDA in three out of last five years and a minimum net worth of ₹2000 crore. In case of a consortium, the lead member should have a minimum net worth of ₹1001 crore with at least 50.01% equity in the consortium. The ultimate beneficial owner for any bidder should not be the same as that of any other bidder or of any consortium member. “In case of IPs (interested parties) who are funds, ultimate beneficial owner would mean the investment management entity which manages the investments of the fund and not the investors who have invested in the fund," DIPAM said in the preliminary information memorandum.

The government has set a disinvestment target of ₹2.1 trillion for FY21, including the privatization of Air India and BPCL. So far this year government has garnered ₹12225 crore through minority stake sales and initial public offering of Mazagon Dock Shipbuilders Limited. It is, however, yet to carry out any strategic disinvestments so far this fiscal year. While the finance ministry had missed the disinvestment target of ₹65,000 crore for FY20 by ₹14,701 crore, it is likely to miss the target again due to the pandemic induced economic downturn.

Shipping industry is a vital part of the global freight transportation system accounting for transporting 90% of world trade. The Industry has witnessed large scale consolidation globally and is dominated by the five players--A.P. Moller–Maersk Group, Mediterranean Shipping Company, China Ocean Shipping Company, CMA CGM Group, Hapag-Lloyd-- which account for over 65% of the world’s market share. The top five countries in terms of cargo carrying capacity are Greece, Japan, China, Germany and Singapore. Germany, China and Greece own 39% of the world container carrying ship fleet.

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