Non-core asset demerger likely to delay Shipping Corp and BEML sale

Ahead of the privatisation of Shipping Corporation of India (SCI) and BEML, the Centre is implementing changes in the scheme of demerger of non-core assets of the two public sector undertakings (PSUs). This could delay the strategic divestment timelines of the two PSUs.

Some changes, including transfer of some extra cash to the demerged entity, are under process for SCI. The board is said to have approved it for enabling the privatisation process.

Post implementation of these changes, and subsequent approvals from the ministry of corporate affairs, the Centre will invite financial bids from suitors. 

“The process is time-consuming, and we will be ready to invite financial bids for SCI in 3-4 months,” said an official.

Similar timeline is expected for the privatisation of BEML as the non-core demerger process is underway, the official added.

For demerger of non-core assets of SCI, Shipping Corporation of India Land and Assets Limited (SCILAL) was incorporated under the Companies Act, 2013 on November 10, 2021.

The entity has its registered office at Shipping House, Mumbai, and has been formed with the objective to hold and dispose of non-core assets of SCI.

The demerged entity has the same or replica shareholding as SCI. SCILAL has an authorised capital of Rs 5 lakh and paid-up share capital of Rs 1 lakh.

In the scheme for demerger of non-core assets announced by SCI, certain changes, including extra surplus cash, had to be approved, the official said.

The board of SCI met on Friday and is learnt to have approved it, the official said. 

According to the scheme of demerger of non-core assets of SCI, surplus cash was required to be transferred to the demerged entity’s account for maintenance and upholding of such assets.

According to the scheme of demerger announced by SCI in March 2022, the amount for maintenance of non-core assets was kept at Rs 450 crore.

This amount could be enhanced, depending on the utilisation of ongoing vessel acquisition and surplus from working capital requirements, in accordance with the scheme of demerger. 

As part of the demerger process, the transfer of Maritime Training Institute (MTI) and Shipping House to SCILAL would be done after completion of the privatisation process. This will pave the way for a smooth transition. 

The transfer of the two assets would be subject to Maharashtra government’s approval. 

The book value of MTI as recorded by SCI is about Rs 2,390 crore and the Shipping House building has been recorded at Rs 26.88 lakh.  

The Centre is looking to sell its entire 63.75 per cent stake in SCI along with transfer of management control.

In March 2021, the Centre had received multiple bids for buying out the government's stake in the company, but the process has been delayed due to the resurgence of Covid and geopolitical tensions.

With regards to BEML, BEML Land Assets — a demerged entity housing non-core assets — has been formed with an authorised capital of Rs 10 lakh and paid-up share capital of Rs 1 lakh. The demerged entity requires approvals from Karnataka and West Bengal governments for some of the assets that are to be transferred.

The government is looking to sell 26 per cent stake in BEML out of the total 54.03 per cent stake it holds along with transfer of management control.