Centre kicks off sale of residual stake in CMC

NEW DELHI: The government today kicked off the sale of its residual stake in Tata group-controlled, CMC with the appointment of Enam Financial and HSBC as lead managers to the public offering.
With the government exiting the IT company, it will open the doors for the Tatas to examine integration options between TCS and CMC which have been in the air for some time now. Tata Sons has already given its consent to the government for selling its residual stake to the public.
After the Tata acquisition, both TCS and CMC have been collaborating on several fronts including marketing exercises. TCS has already consolidated CMC revenues in its balance sheet. Further integration of the companies may gain speed after the government exits CMC. Interestingly, there is also anticipation on the TCS IPO hitting the market next year although estimates are that CMC will happen before that.
As per indications, the issue will be done close to the current market rate in a range of Rs 450-500 and will be completed before March 31. At current rates, the book built issue will fetch the government close to Rs 200 crore for its 26.5% stake. The Centre holds 26.25% in CMC while Tatas control 51% of the company’s paid-up equity capital of Rs 15.15 crore. The government had divested 51% in CMC to Tata Sons, the sole bidder for the PSU, for Rs 152 crore at Rs 197 a share on October 5, ’01. The entire residual holding would be sold in the domestic market.
The government has decided that the sale of residual shares in companies such as CMC, IPCL and IBP will continue although strategic sale of majority holding in PSUs such as the Shipping Corporation will be put on hold till the Supreme Court decides on the legality of sell-off. The disinvestment ministry is concentrating on the legal option to resolve the impasse arising out the apex court’s decision to stay divestment of HPCL and BPCL. The SC had directed that all cases challenging divestment to be transferred to it, so as to enable the bench to examine whether privatisation requires parliamentary approval and whether it is legally permitted.