The process of disinvestment
witnessed further acceleration this year with 25 PSUs / units
disinvested with realization touching Rs.8661.33 crores which
includes dividend and dividend tax etc. Apart from that a sum
of Rs.1442.18 crores is expected to be realized. The achievement
is significant when compared to the total disinvestment since
creation of separate Department of Disinvestment which stands
at 34 PSUs / Units disinvested. In terms of realization also the
figure is Rs.8661.33 crore this year against a total of Rs.11,300
crore between 1999-2002.
PACE OF DISINVESTMENT IN CALENDAR
YEAR 2002
During the year 2002, 25 PSUs /
units have been disinvested. The month-wise details is as follows:-
|
Sl.
|
Month
|
PSU/Asset
Sold
|
Cumulative
Total
|
|
1.
|
Jan.,2002
|
Hotel Ashok, Madurai
|
1
|
|
2.
|
Feb.,2002
|
IBP ;Videsh Sanchar Nigam Limited
; Paradip Phosphates Limited; Hotel TBABR Mamallapuram;
Hotel Agra Ashok; Luxmi Bilas Hotel Udiapur.
|
7
|
|
3.
|
Mar.,2002
|
Qutab Hotel, New Delhi; Lodi
Hotel, New Delhi; Centaur Hotel, Juhu Beach, Mumbai; Centaur
Rajgir.
|
11
|
|
4.
|
Apr.,2002
|
Hindustan Zinc Limited ; Centaur
Hotel Airport, Mumbai.
|
13
|
|
5.
|
May, 2002
|
Maruti Udyog Limited.
|
14
|
|
6.
|
Jun., 2002
|
Indian Petrochemicals Corporation
Limited.
|
15
|
|
7.
|
Jul.,2002
|
Hotel Airport Ashok Kolkata
; Kovalam Ashok Beach Resort ;Hotel Manali Ashok.
|
18
|
|
8.
|
Aug.,2002
|
Hotel Khajuraho Ashok ; Hotel
Varanasi Ashok.
|
20
|
|
9.
|
Sept.,2002
|
Hotel Aurangabad Ashok
|
21
|
|
10.
|
Oct.,2002
|
Hotel Ranjit, Hotel Kanishka,
Hotel Indraprastha and Chandigarh Hotel Project.
|
25
|
Note: In Nov 2002,
residual share of Modern Food Industries (India) Ltd sold.
- A sum of Rs 8661.33 crores, including
dividend, dividend tax etc. has been received as realization
from the above disinvestments. Apart from that, a sum of Rs.
1442.18 crores is expected to be realized.
The process of
disinvestment of Government shareholding in Public Sector Undertakings
was initiated in 1991. However, from 1991 to 1999 the Government
had primarily sold minority shares in Public Sector Undertakings.
The disinvestment process, however, was accelerated after the
Department of Disinvestment was set up on 10th December
1999 with the responsibility to deal with all matters relating
to disinvestment of Central Government equity from Central Public
Sector Undertakings. With the setting up of the Department of
Disinvestment the strategic sale of Public Sector Enterprises
with transfer of management control commenced. The Department
of Disinvestment was later on made into the full-fledged Ministry
of Disinvestment.
MAJOR ACHIEVEMENTS OF THE MINISTRY
OF DISINVESTMENT DURING THE LAST THREE YEARS (1999-2002)
- During the period of three years
(1999-2002), disinvestment proceeds (inclusive of dividend,
dividend tax etc.) have provided more than Rs. 11,300/- crore
for the Government exchequer.
- Government has successfully disinvested
through strategic sale companies like Modern Foods Industries
(India) Ltd. (MFIL), Bharat Aluminium Company Ltd. (BALCO),
CMC Ltd., HTL Ltd., IBP Ltd., Videsh Sanchar Nigam Ltd. (VSNL),
Paradeep Phosphates
Ltd. (PPL), Hindustan Zinc Ltd. (HZL), Indian Petrochemicals Corporation
Ltd. (IPCL) and Maruti Udyog Ltd. (MUL) and a number of hotels
of India Tourism Development Corporation Ltd. (ITDC) and Hotel
Corporation of India Ltd. (HCI). A statement indicating the realization
from strategic sale during 1999-2002 is at Annexure 1.
From the year 1992
to 1999, much of the disinvestment was in the form of sale of
minority stake in profit making-enterprises. The price realized
through the sale of minority stakes, even in blue chip companies
such as Indian Oil Corporation, Bharat Petroleum Corporation Ltd.
and Videsh Sanchar Nigam Ltd. was low as indicated by the price
to earning ratios as compared to price realized through strategic
disinvestment as indicated in Annexure-2.
By selling loss making
companies and those companies which are under reference to Bureau
of Industrial and Financial Reconstruction (BIFR) like Paradeep
Phosphates Ltd. (PPL), some hotels of ITDC/HCI etc. the Government
saved the amount it would have had to pay in rehabilitation packages,
which will now be provided by strategic investor, as required.
Disinvestment through
strategic sale has raised the value of PSUs listed stocks (and
therefore their total market cap) by over 78% in value from around
Rs. 96,062 crore in January, 2002 to over Rs.1,70,375 crore in
July 2002. This has benefited all those who have invested in PSU
stocks, including small retail investors and financial institutions
etc. A statement indicating recent increase in the market cap
of CPSUs under strategic disinvestment is given at Annexure-3.
The small investor
who had stake in PSUs has gained tremendously due to open offer
after strategic sale in CMC, VSNL, IBP, HZL and IPCL.
Maruti Udyog Limited
(MUL): Government on 14th May 02, approved disinvestment
in Maruti Udyog Limited (MUL) through a two-stage process
A rights issue by
MUL in the first phase of Rs.400 crores with Government renouncing
its rights share to Suzuki. Suzuki would gain majority control
and pay Rs 1000 crores to Government as control premium.
Sale of its existing
shares through a public issue in the second phase ; the issue
to be underwritten by Suzuki.
ANALYSIS OF THE
DEAL (i) In the earlier transactions with SUZUKI in 1982 and
1992, when SUZUKI’s shareholding was allowed to be increased (vis
a vis GOI), first from 26% to 40% and then from 40% to 50%, no
control premium had been paid by SUZUKI, though control had passed
to them. As a matter of fact, Government received no payment at
this stage as shareholding was allowed to be increased by issuance
of new shares to MUL. (ii) The pricing formula in 1992 also yielded
a low price per share of Rs.269 at which the transaction was done.
(iii) Using the same formulae of 1992 now, the price per share
would be Rs.1153. As against this, the current transaction would
be at a minimum of Rs.3684 assuming Suzuki’s ‘put option’ undertaking
at Rs.2300. (iv) Also, against ‘nil’ control premium last time,
the GOI is being paid Rs.1000 crore as control premium.
In general, security
of employment has continued in the PSUs disinvested so far and
no retrenchment has taken place due to disinvestment. In most
of the companies disinvested, employees have gained by way of
raise in pay and allowances, which will lead to growth in their
buying power and therefore growth in the region. For example –
Wages have been increased by an average of Rs. 1600 per employee
in Modern Food Industries Limited.
Employees of Paradeep
Phosphates Ltd. (PPL) were agitating for wage revision at the
time of accepting bids as wage revision due w.e.f. 1997 had not
been affected due to the health of the company. The new management
had assured that revision of pay scales would be implemented within
90 days of their becoming strategic partners. They have implemented
the revised wages w.e.f. Mar 02.The revision would mean an average
increase of Rs. 2789 per month for 1140 regular employees, which
is an additional financial burden of Rs. 31.61 lakh per month
(approx. Rs. 3.79 crore per annum).
In BALCO, wages had
not been increased after 1.4.1999, even though a revision was
due. In spite of loss of about Rs. 200 crore due to the strike,
an ex-gratia payment of Rs. 5,000/- was paid to all employees
and a long term wage agreement for a period of five years entered
into by the Management with the employees on 7.10.2001, which
guaranteed benefit of 20% of basic pay to each employee, besides
increase in a number of allowances.
Public-private participation
and Private Financing Initiative received a boost through disinvestment.
Encouraged by the results at the
national level, States have been encouraged to take similar steps
and disinvestment in State Level Public Enterprises (SLPEs) has
begun.
Disinvestment Commission,
which had been reconstituted on 24th July 2001, has
been active and have given a thrust to the programme of disinvestment.
Several recommendations were received by Government from the Commission
in this calendar year.
On 9th
December,2002, Minister of Disinvestment announced certain policy
decisions, in a suo-motu statement on "Disinvestment Policy
and Approach" laid in both Houses of Parliament. A copy of
the statement is at Annexure 4, the summary of which
is given below:
The main objectives of disinvestment
is to put national resources and assets to optimal use and in
particular to unleash the productive potential inherent in our
public sector enterprises.
Government will ensure that disinvestment
does not result in private monoplies.
Government would set up a Disinvestment
Proceeds Fund
- Ministry of Finance and Miinistry
of Disinvestment will work out guidelines for disinvestment
of natural assets companies.
- Ministry of Finance will also
prepare for consideration of the Cabinet Committee on Disinvestment
a paper on the feasibility and modalities of setting up an
Asset Management Company.
Annexure-1.
Strategic Disinvestment
beginning 1999-2000
Rs. in crore
|
Sr.
No
|
Name
|
GoI Equity
sold
|
Realisation
|
Govt. borrows
@ 10%; Interest on
realization
annually
|
Dividend recd
by Govt. on equity sold average of last 8 years upto 2000
|
|
1a.
|
MFIL
|
9.63
|
105
|
10.5
|
0.48
|
|
1b.
|
MFIL – Phase
II
|
3.38
|
44**
|
4.4
|
0.17
|
|
2.
|
BALCO
|
112.52
|
826.5
|
82.65
|
5.69
|
|
3.
|
CMC
|
7.73
|
152
|
15.2
|
0.8
|
|
4.
|
HTL
|
11.1
|
55
|
5.5
|
0.29
|
|
5.
|
LJMC
|
0.77
|
2.53
|
0.25
|
Nil
|
|
6.
|
ITDC-18 HOTELS
|
|
|
|
|
|
a)
|
Agra
|
1.70
|
3.61
|
0.36
|
NIL ## (Annual
Loss 1.51)
|
|
b)
|
Bodhgaya
|
0.44
|
1.81
|
0.18
|
NIL ## (AL 0.30)
|
|
c)
|
Hassan
|
0.21
|
2.27
|
0.23
|
NIL ## (AL 0.63 )
|
|
d)
|
Mamallapuram
|
0.83
|
6.13
|
0.61
|
NIL ## (AL 0.51 )
|
|
e)
|
Madurai
|
0.71
|
4.97
|
0.50
|
NIL ## (AL 0.89 )
|
|
f)
|
Bangalore
|
0.96
|
39.41(up-front
fee); (4.11 – MGAP)
|
6.00*
|
NIL ## (AL 1.78 )
|
|
g)
|
Qutab
|
0.83
|
34.46
|
3.85*
|
NIL ## (AL 0.2 )
|
|
h)
|
Lodhi
|
0.96
|
71.93
|
8.68*
|
NIL ## (AL 2.0 )
|
|
i)
|
LVPH, Udaipur
|
0.55
|
6.77
|
0.68
|
NIL ## (AL 1.0 )
|
|
j)
|
Manali
|
0.63
|
3.65
|
0.37
|
NIL ## (AL 0.3 )
|
|
k)
|
Kovalam
|
1.85
|
40.39
|
4.04
|
NIL ## (AL 1.9 )
|
|
l)
|
Aurangabad
|
1.16
|
16.50
|
1.65
|
NIL ## (AL 1.1 )
|
|
m)
|
Airport Kolkata
|
0.66
|
19.39
|
1.94
|
NIL ## (AL 2.6 )
|
|
n)
|
Khajuraho
|
0.97
|
2.19
|
0.22
|
NIL ## (AL 0.80 )
|
|
o)
|
Varanasi
|
1.74
|
8.38
|
0.84
|
NIL ## (AL 1.9 )
|
|
p)
|
Kanishka
|
1.90
|
92.37**
|
10.97*
|
NIL ## (AL 7.6 )
|
|
q)
|
Indraprastha (AYN)
|
0.80
|
43.39**
|
5.18*
|
NIL ## (AL 3.4 )
|
|
r)
|
Chandigarh project
|
7.00
|
17.27**
|
2.03*
|
Incomplete project
|
|
s)
|
Ranjit
|
3.00
|
29.20 **
|
2.92
|
NIL ## (AL 3.2)
|
|
|
Sub-total
|
26.90
|
444.09 **
|
51.25 *
|
|
|
7.
|
HCI-3 HOTELS
|
|
|
|
|
|
a)
|
Juhu, Bombay
|
8.95
|
153
|
15.3
|
NIL ##
|
|
b)
|
Rajgir
|
1.72
|
6.51
|
0.65
|
(Annual Loss
1.56)
|
|
c)
|
Airport, Mumbai
|
4.0
|
83
|
9.96*
|
NIL ##
|
|
|
Sub-total
|
14.67
|
242.51
|
25.91*
|
(Profit 0.32)
|
|
8.
|
IBP
|
7.44
|
1153.68
|
115.36
|
1.84
|
|
9.
|
VSNL
|
71.25
|
3689^
|
368.9
|
10.4
|
|
10.
|
STC
|
-----
|
40
|
4
|
------
|
|
11.
|
MMTC
|
----
|
60
|
6
|
------
|
|
12.
|
PPL
|
320.16
|
151.70
|
15.17
|
(-) 71#
|
|
13.
|
JESSOP
|
68.13
|
18.18**
|
1.82
|
(-) 55#
|
|
14.
|
Hindustan Zinc
Ltd.
|
109.85
|
445
|
44.5
|
3.5
|
|
15.
|
Maruti Udyog
|
66.00
|
2424^^ **
|
242.4
|
13
|
|
16.
|
IPCL
|
64.5
|
1490.84
|
149
|
16.24
|
|
|
Grand Total
|
894.03
|
11344.03
|
1142.79
|
- 73.59
|
* Including NPV of
future earnings on MGAP& lease rentals ## Loss making for
latest years ** expected ^ including dividend & divi. Tax
^^ (minimum amount to be received over 3 tranches; could go up
to Rs. 3158 cr) # Restructuring/Conversion of Loan into equity
& waiver of interest - hence a loss, Companies at Sr. No.
5,6(r),7,13 are subsidiaries. Sale at 13 approved by Govt./BIFR,
but transaction not completed due to pending case in the Hon’ble
High Court, Calcutta.
Annexure - 2
PRICE TO EARNING
RATIOS
SALE OF SHARES
Vs. STRATEGIC DISINVESTMENT
|
|
Sale of Shares
|
Strategic Disinvestment
|
| |
1991-99
|
2000-2002
|
|
1.
|
IOC
|
4.9
|
BALCO
|
19
|
|
2.
|
BPCL
|
5.7
|
CMC
|
12
|
|
3.
|
HPCL
|
5.9
|
HTL
|
37
|
|
4.
|
GAIL
|
4.4
|
MFIL
|
Very high as earning per
share was negative
|
|
5.
|
VSNL
|
6.0
(in monopoly days)
|
LJMC
|
-do-
|
|
6.
|
|
|
PPL
|
-do-
|
|
7.
|
|
|
JESSOP
|
-do-
|
|
8.
|
|
|
IBP
|
63
|
|
9.
|
|
|
VSNL
|
11 (inclusive of income
from dividend etc.)
(after the end of monopoly)
|
|
10.
|
|
|
HZL
|
26
|
|
11.
|
|
|
MARUTI
|
89
|
|
12.
|
|
|
IPCL
|
58
|
Annexure – 3
Recent increase
in market cap of CPSUs under strategic disinvestment
|
S. No.
|
Company Name
|
Market Price
January 8, 02
(Rs./Share)
|
Market Price
July 15, 2002
(Rs./Share)
|
% increase
|
|
1.
|
Madras Fertiliser Ltd.
|
3.50
|
13.20
|
277
|
|
2.
|
Engineers India Ltd.
|
80.15
|
374.55
|
367
|
|
3.
|
Balmer Lawrie & Co.
|
23.85
|
97.90
|
310
|
|
4.
|
Hindustan Organics &
Chemicals Ltd.
|
7.25
|
22.45
|
209
|
|
5.
|
Shipping Corporation of India
|
31.55
|
86.20
|
173
|
|
6.
|
Hindustan Machines Tools Ltd
|
4.50
|
28.40
|
531
|
|
7
|
TOTAL
|
150.80
|
622.70
|
313
|
