Govt's offer to sell 90% in MSTC finds no takers

KOLKATA: The disinvestment of MSTC, a public sector trading company, has flopped as of now, with no buyer responding to the global tender floated by the government seeking bids for the sale.
Sale of the government’s 90% plus holding in MSTC was cleared by the Union Cabinet in July, ’03. The disinvestment ministry had then floated advertisements directly instead of appointing a merchant banker to look for a buyer for MSTC.
Top government officials told ET that with no takers for MSTC, the government has now to decide whether to keep the company under its fold or look for buyers again by initiating a re-tendering process. Steel ministry officials said that MSTC’s disinvestment did not evoke any response considering the nature of business of the PSU trading company. MSTC mainly imports or auctions de-canalised commodities which all private players are anyway allowed to do so.
Originally designed to trade in metal scrap, MSTC changed its business profile to trade in ferrous and non-ferrous metals, coal, coke and petroleum products like naphtha, kerosene, etc. Today MSTC is also doing off-site stockyard management for many of the steel companies and has invited steel majors to jointly carry out marketing of finished iron and steel too. Though MSTC’s financials have been sound, the company has a low asset base because of its nature of business. This also made the disinvestment offer unattractive, ministry sources believe. MSTC was also dressed up for disinvestment with the government buying out Harsco, USA’s 40% stake n MSTC’s subsidiary — Ferro Scrap Nigam months before the calling for bids.
In fact, MSTC’s income increased almost four times from Rs 453 crore in ’01-02 to over Rs 2,079 crore in ’02-03 while its net profit doubled to Rs 9 crore plus as against Rs 4.5 crore. With a low equity base of Rs 2.2 crore, MSTC reserves and surplus were a comfortable Rs 66.5 crore for the year ended March ’03 putting its net worth valuation to around Rs 69 crore.
MSTC’s paid up of Rs 2.2 crore is after the company declared bonus shares in the ratio of 1:1 in ’93-94.
However, with a gross block fixed asset base of Rs 6.04 crore, MSTC’s March-end net fixed asset base was a low Rs 1.45 crore. For the year-ended March ’03, MSTC also paid a high 83% dividend as against 42% in previous year. According steel ministry officials MSTC dividend pay history has by now paid more than 10 times of its paid-up.