Central public sector enterprises to merge or list subsidiaries

NEW DELHI: The government will push central public sector enterprises (CPSEs) to either merge subsidiaries or list them. A senior government official said this may be kickstarted by coal sector behemoth Coal India (CIL) which has eight subsidiaries, of which five are profit-making.

“Unless there is a strategic need, either because the subsidiary is working in a different geography or is required for reasons of regulations or avoiding potential risks, the subsidiary should either be merged or listed,” said the official, who did not wish to be identified.

CIL has a mine planning subsidiary, besides eight others.

“All companies should unlock the value from their subsidiaries,” said the official. Another govt official said CIL, through its administrative ministry, had resisted a similar proposal last year. “CIL believes all of its subsidiaries are strategic, and it flagged risks such as labour issues,” said the official. He said the government may be able to push some CPSEs to merge or close their loss-making subsidiaries, he said.

As per the latest data there are around 120 subsidiaries of 169 CPSEs and most of them are loss-making enterprises.

Some experts say the move may benefit all companies, including government-owned. “Listing will help raise resources for the holding firm, find better valuation for the subsidiary and also fetch better dividends to the government,” said MP Shorawala, a former independent director with Concor.

“There could be a possibility that the government may identify subsidiaries as non-core assets, leaving little room for CPSEs to either merge or list,” said Shorawala.