MCA approves demerger of core and non-core assets of Shipping Corp

Financial bids may be invited a month or two after SCILAL is listed

The Ministry of Corporate Affairs (MCA) on Thursday issued an official order approving the proposed demerger of the core and non-core assets of Shipping Corporation of India (SCI).

“The corporate affairs ministry sanctioned the scheme of arrangement for demerger of non-core assets (demerged undertaking) of SCI into Shipping Corporation of India Land and Assets (SCILAL) under Section 230-232 of the Companies Act,” SCI told stock exchanges on Thursday.

This could pave the way for the privatisation of SCI, with the government looking to divest its entire 63.75 per cent stake in the national cargo carrier.

Shares of SCI soared 9.79 per cent to Rs 126.20 apiece after the MCA’s approval. The government’s stake is worth Rs 3,747 crore at this price.

The matter was before the MCA as objections were raised over the Rs 1,000-crore cash transfer to the demerged entity — SCILAL, which will hold SCI’s non-core assets.

The ministry held a meeting on December 29, 2022, to take a final call on the demerger. However, the order was awaited.

“Since the demerger plan has been approved, the Department of Investment and Public Asset Management (DIPAM) is likely to expedite the privatisation process and could soon decide on inviting financial bids,” said two people in know.

According to them, financial bids are expected to be invited in a month or two after the demerged entity gets listed on the stock exchange.

Issue with demerger

In December 2020, DIPAM had invited expressions of interest (EoIs) for strategic disinvestment of the government’s entire stake of 63.75 per cent in SCI, along with the transfer of management.

However, the stake sale plan was delayed following objections to the proposal in the revised demerger scheme of a Rs 1,000-crore cash transfer to SCILAL for the maintenance of SCIs two assets including Shipping House, which is SCI’s registered office, and Maritime Training Institute in Mumbai. 

The employees’ union and SCI officials objected to the amount saying it was too high. The original demerger scheme involved the transfer of Rs 450 crore to SCILAL. However, the SCI board approved the revised scheme in May 2022 and asked the MCA to vet the plan.

The company’s privatisation is now likely to be completed in FY24.

Thus far in the current financial year, the DIPAM has raised Rs 31,106 crore from disinvestment. The Union Budget has revised the asset-sale target to Rs 51,000 crore from Rs 65,000 in the Budget Estimates.

Disinvestment push

• SCI board approved revised demerger plan in May 2022
• Employees’ union raised objection to proposed transfer of Rs 1,000 cr in cash to demerged entitiy
• Govt wants to sell its entire 63.75% equity in SCI
• Financial bids are expected once demerged entity gets listed