Disinvestment Commission for sale of 51% stake in IRCON

NEW DELHI: The Disinvestment Commission has fowarded yet another report to the government recommending sale of 51 per cent stake in railway construction company, IRCON along with management control.
The revamped commission in its fourteenth and latest report submitted to the government recently has said that majority stake should be offered to strategic partner along with management control through competitive bidding route.
The report also argues that government should continue to hold 26 per cent stake in the company.
"The government should undertake phased dilution of equity having ensured government stake does not fall below 26 per cent for atleast 3-5 years," it said.
Inorder to retain employees the commission recommended an incentivization scheme like Employee Stock Option Scheme.
Government currently owns 99.73 per cent stake in the company which has a paid up capital of Rs 4.95 crore and a employee strength of 1808.
It recommended that company should pay back substantial portion of free cash and marketable securities prior to disinvestment including a special dividend to return free cash.
The commission asserts that IRCONs continued association with its parent, Ministry of Railways, would prove to be a value enhancer as well as suitable incetnive to support its development activities in the interim period before complete disinvestment.
The report which runs into nearly hundered pages also recommended privatising three other PSUs - Central Inland Watertransport Corporation, Hindustan Shipyard and Cochin Shipyard.
In case of CIWTC, it recommended outright sale of the company to private investor along with restructuring plan.
Alternatively it has suggested closure of the company by way of sale of assets.
The company has an equity base of Rs 108 crore with government equity placed at 99.74 per cent while the balance is shared by Assam and West Bengal goverments. It has accumulated losses to the tune of Rs 6,500 crore and its net worth has been wiped out.
In the case of CSL, the commission recommended sale of 51 per cent stake to a strategic partner who could bring in effeciencies and capital while retaining some stake in the company.
The report noted that CCL being a private limited company, would imply that number of shareholders are restricted to 50 therefore requiring shareholders approval before privatisation.
It further added that the issue of company''s association with Defense and Navy would have to be sorted out and proper screening of bidders from national security point was needed.
Further, such facilities may have to be seperated and handed over to defence department.
CSL has an authorised equity base of Rs 250 crore with government shareholding placed at 100 per cent.
The commission also recommended sale of entire government equity in HSL to a strategic partner along with restructuring package to be worked out with the buyer.
Alternatively, it suggested closure of the PSU which has an equity base of Rs 150 crore where government equity stands at 100 per cent.
Proper screening of buyers from national security point of view was also suggested as the company is located close to Eastern Naval Comand and Dockyard.
The commission felt that seperate facilities created with defense funds could be demerged and handed over to Navy.