The hurdles preventing the demerger of Shipping Corporation of India Land and Assets (SCILAL) and Shipping Corporation of India (SCI) are likely to be removed in the next couple of weeks, following which SCILAL will be listed on the stock exchanges, multiple sources aware of the ongoing proceedings said.
There were two major hitches to the demerger. One related to the waiver of stamp duty by the Maharashtra government and the other to a letter from an SCI employees’ association to the Securities and Exchange Board of India (SEBI).
A senior government official told Moneycontrol that the issue surrounding the letter by the SCI employees’ association has been resolved and SCI will send a reply to the regulator and bourses this week.
"A letter from some employees has gone to SEBI on categorising a particular property under SCI Land and Assets... The issue was already sorted, it's not that serious; the employees had got the wrong information. Most probably SCI will write a reply to SEBI this week," the official said.
Emails sent to the ministries of finance, and ports, shipping and waterways, SCI and SEBI remained unanswered until the time of publication.
The other issue of waiver of stamp duty by the Maharashtra government for the registration of SCILAL, expected to be around Rs 300 crore, is also expected to be resolved soon, multiple sources said.
"We have requested the Maharashtra government to exempt stamp duty. So far the reply has not come," the government official cited above said, adding that financial bids for the company will be invited in September and that the listing of SCILAL will happen soon.
Similarly, multiple senior executives from SCI told Moneycontrol that officials from the company, the Union government and the Maharashtra state revenue department met last week, and the state government is expected to forgo stamp duty.
"The state government has agreed to waive stamp duty for the registration of SCILAL and a formal letter for the same is expected to come soon," a senior SCI officer said.
Another senior SCI executive said that all formalities for the registration of SCILAL are likely to be completed in the next two weeks.
The demerger of SCI and SCILAL into separate entities was approved by the Ministry of Corporate Affairs in February this year but the demerger has faced multiple delays and is still pending.
Earlier, the government had planned to list SCILAL on the stock exchanges by June but the process was delayed due to issues raised by SEBI. The government official mentioned above too said that there were a lot of institutional problems while getting SEBI approval for the listing of SCILAL.
"SCI was still operating under the old Employees' Provident Funds Scheme, 1952, which delayed the receipt of SEBI approval for the listing of SCILAL," the official said.
As part of the strategic sale process, the government hived off the real estate assets of SCI — Shipping House, a 19-storey building, and the Maritime Training Institute, both in Mumbai — and certain other non-core assets to SCILAL.
As per the balance sheet of SCI, the value of non-core assets meant for demerger as on March 31, 2022, stood at Rs 2,392 crore.
The alternative mechanism (AM) approval for the divestment of SCI has also come in and SCI has already received the all-clear from the Maharashtra Housing and Area Development Authority (MHADA) to transfer ownership of a training institute that was built on MHADA land to its demerged entity, SCILAL.
The AM on strategic disinvestment consists of the finance minister, the minister for road transport and highways, and the minister representing the respective administrative departments to decide on matters relating to the terms and conditions of the sale.
The AM for SCI comprises the ministers of finance, road transport and highways, and shipping.
As part of the divestment of SCI, the central government is looking to sell its 63.75 percent stake in SCI. It expects three to five players to bid for its stake.
Sources said that companies such as Vedanta, DP World and shipping firms from Norway and South Korea have shown interest in SCI in the virtual road shows that have been conducted.
Based on the current stock market price, the government would rake in over Rs 3,010 crore for its stake in SCI.
The company reported net sales of Rs 1,200 crore in the quarter ended June 2023, down 17.9 percent from Rs 1,462.2 crore in the corresponding quarter a year earlier.
Net profit came in at Rs 171.6 crore, up 57 percent from Rs 109.2 crore a year ago. Earnings before interest, taxes, depreciation and amortisation (EBITDA) stood at Rs 363.8 crore in the quarter, compared with Rs 299 crore in the corresponding period in the previous fiscal.
SCI has a fleet strength of 70 vessels and is the largest Indian shipping company, catering to the overseas and coastal transportation of goods.
SCILAL was formed in November 2021 to hold the non-core assets of SCI, which falls under the ministry of ports, shipping and waterways. The SCI’s board of directors authorised a demerger scheme in August last year.
SCI announced the demerger of its land and assets in a 1:1 ratio, which was completed on March 31, 2023. Thus, if an investor held 100 shares of SCI, he or she would get an equal number of shares of SCILAL.
In November 2020, the Union cabinet gave in-principle approval for the strategic divestment.
In December 2020, the Department of Investment and Public Asset Management invited expressions of interest for the disinvestment of the government’s entire stake of 63.75 percent in SCI.
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