Selloff blues: Name game trips STC

NEW DELHI: What''s in a name? The answer varies, depending on whether you’re talking about a scented rose or a state-owned company poised to shed its PSU character via privatisation, but carries a name that indicates government activity. Even as the Centre is set to privatise State Trading Corporation, it is faced with the dilemma of allowing the acquirer to continue with the existing name. The problem is that the name suggests the company is a government-owned canalising agency, although the Centre’s holding will fall to 26% post divestment. On the other hand, dictating a name change immediately after divestment is not a very desirable proposition, as it could have implications for brand value attached to the PSU by bidders. A section within the government feels the valuation of the PSU would be lower if a name change is mandated immediately after change of management.
The government has thus come around to a compromise solution — allow the acquirer to keep the name intact for three years, after which a suitable re-christening will have to be done. During the three years the acquirer will be allowed to use “STC� as the entity’s name, it will have to add a footnote stating the company is not a government enterprise. The decision on keeping the name intact for three years is based on the logic that the total lock-in period for government holding of residual shares is of the same duration. The strategic partner will have a call option during the second year of the privatisation and the government will have a put option in the third year.
The core group of secretaries which met last month, has already cleared the transaction document, the shareholders agreement and share purchase agreement, although differences over valuation of the properties of STC continue. Sources close to the development say a section within the government feels the valuers have under-valued the properties owned by STC.
Also, the Delhi Development Authority and Land and Development Office — the two wings of the urban development ministry — have said that a part of the unearned income on the PSU’s prime property on Janpath, in Delhi’s central business district, should accrue to them.
The Cabinet Committee on Disinvestment will now decide on these two matters on property.