Govt To Ask Iran Firm To Exit Mfl

The inter-ministerial group has decided to ask National Iranian Oil Company to offload its 25.44 per cent stake in Madras Fertilis- ers Ltd in order to facilitate the public sector company's disinvestment. This has been done according to the Fertiliser Formation Agreement. The Iranian firm currently enjoys special minority protection rights including veto rights, which exceed the protection normally accorded to minority shareholders under the Companies Act, 1956. These rights are not likely to be acceptable to prospective strategic investors. Further this is likely to seriously deplete the PSU's value. NIOC itself is believed to be not interested in picking up more stake in MFL. However, if this does not materialise, another option available with the government is to reduce the stake of NIOC and itself by infusion of fresh equity by the strategic partner. Else, the government may discuss with NIOC, the dilution of certain rights in line with the Companies Act, 1956. If NIOC agrees to offload its 25.44 per cent, not only will the valuation of MFL improve, NIOC will also be able to offload its stake along with the government at no additional costs and at an attractive transaction price. Also, the final approval of the government for the financial restructuring package for MFL will have to be sought before the proposed divestment. This will help in maximising the value realisation. The final price bids are likely to be invited only after the approval is received. The government is likely to grant its approval in the next three to four months and this fact will be disclosed in the information memorandum. The IMG was of the view that discussions with NIOC should be held as soon as possible in order to facilitate a final decision on the subject after the MFL board meeting on September 21. Thereafter, the advertisements inviting the expression of interest will be published. IMG has decided to provide up to six weeks to potential bidders for submission of expression of interest. However, the criteria for qualifications of the bidders have not yet been decided. At the IMG it was also decided that a new shareholders agreement be worked out by global advisors ICICI Securities and Bank of America in consultation with the government and NIOC. It was also disclosed at the meeting that discussions for tieup of LNG as a possible feedstock and subsequent conversion of the plant are already in advanced stages. The government had earlier identified MFL as a non-core investment and had consequently decided to reduce its stake in the fertiliser company to 26 per cent from the present 59.22 per cent.