Foreign SCI bidders can buy 45% via open offer

NEW DELHI: There is a loophole in the guidelines issued for disinvestment in the Shipping Corporation of India which seeks to limit foreign ownership to 25 per cent.
Foreign companies that form joint ventures with Indian partners could increase their stake to 45 per cent through the open offer route, according to expert opinion, considering that there is no sectoral cap on foreign investment for shipping
As per the guidelines issued for SCI’s disinvestment, foreign liner companies that tie up with an Indian joint venture partner could only pick up a maximum stake of 25 per cent of the 51 per cent that has been put on the block.
However, sources said that advisors to the SCI disinvestment SBI Caps and Lazard Brothers have said that the law cannot stop a foreign joint venture partner from picking up another 20 per cent through the open offer route.
The government currently owns 80.12 per cent of SCI and the balance of 19.88 per cent is held by FIs, FIIs, mutual funds and retail investors. The government has now decided to offload 51 per cent of its stake to a strategic partner, while retaining 26 per cent for itself.
Foreign shipping companies who have not shown much interest may like to enter the sector if they are given a majority stake in a company like SCI. The foreign companies have argued that since Indian government policy allows 100 per cent FDI in shipping, there should be no objection to these companies picking up a majority stake.
Although the disinvestment ministry has not commented on this issue and has tended to dismiss the possibility of foreign companies increasing their stake to 45 per cent as “a motivated rumour by domestic companies�.
This enabling provision would help fetch a better price for the government stake in SCI.