November 10, 2020: Privatisation-bound Shipping Corporation of India Ltd (SCI) has sought bids for a consultant to undertake de-merger/disposal of its non-core assets (real estate) ahead of its stake-sale and to carry out corporate restructuring for better operational performance of the Navratna company.
SCI’s surprise move will delay the strategic disinvestment of the company, approved by the Union Cabinet in November last year. It is also seen by shipping industry officials as an indication that the government may break up SCI for sale in parts, and those left unsold will continue as a state-run firm.
SCI’s diverse portfolio of assets is seen as a potential deal-breaker because it is rare to find global shipping firms with such varied ship-types that would be interested in the company as a whole.
SCI runs a fleet of 59 ships, including crude oil tankers, very large crude carriers, petroleum product carriers, liquefied petroleum gas carriers, bulk carriers, container ships and off-shore support vessels.
Breaking up SCI based on asset class would be a better bet to sell the core assets of ships, given that the government has decided to exclude non-core assets (real estate) located at Mumbai and Kolkata from the sale process, an industry official said.
Corporate restructuring
The corporate restructuring being planned involves de-merging of a whole or part of a division of SCI as identified by the management. The de-merged part may be merged with an existing subsidiary or hived off as a new subsidiary created for the purpose, according to a November 6 notice issued by SCI seeking Expression of Interest for the consultancy, a copy of which was reviewed by BusinessLine.
SCI has three operating divisions: liner and passenger services, bulk carrier and tanker division and technical and offshore services.
The company has a subsidiary, Inland & Coastal Shipping Ltd, and four joint venture companies that own the LNG carriers in which SCI has a stake.
The SCI management, according to the EoI notice: “may also consider a corporate restructuring exercise involving redistribution of specified verticals (or parts) between divisions and/or demerger of specified vertical(s) which may be merged with existing subsidiaries/hived off as new subsidiaries for better synergy and to improve/enhance the company’s operational efficiency”.
Easing the disinvestment process
The consultant will be tasked with suggesting a roadmap on the scheme of de-merger/hive off/disposal/transfer/alienation of non-core assets, both freehold and leasehold, from core assets. This could include corporate restructuring for a smooth transition, ensuring compliance with required procedure and applicable laws and removing all legal and procedural bottlenecks to “maximise value for the company and shareholders”.
The consultant will have to formulate the scheme of arrangement including all possible structures, tax advisory, design and develop a smooth transition without causing any adverse impact in customer services, market share, assisting and advising on all other activities relating to demerger including human resource related matters, re-casting of accounts etc, the EoI notice stated.
The government has decided to sell its 63.75 per cent stake in SCI to a private strategic buyer. The Department of Investment and Public Asset Management (DIPAM) is yet to issue an expression of interest for the sale.
Source: Business Line