Approves the first strategic sale of a govt company in eight years; proposal to be put before Parliament.
The Union Cabinet on Thursday cleared the sale of loss-making Scooters India. It will be the first strategic sale of a state-owned company in eight years.
This marks a big shift in the disinvestment policy of the United Progressive Alliance government, which has been selling small chunks in public sector undertakings (PSUs).
The last strategic sale of a PSU was in 2003-04, when the National Democratic Alliance government under Atal Bihari Vajpayee sold IBP to Indian Oil, another PSU, for Rs 350 crore.
| PAST STRATEGIC SALES | |||
| Company sold | To | Equity sold (%) | Deal value (Rs crore) |
| BALCO | Sterlite Industries | 51 | 551.5 |
| CMC | Tata Sons | 51 | 152 |
| Hindustan Zinc | Sterlite Opportunities and Ventures | 26 | 445 |
| HTL | Himachal Futuristic Communications | 74 | 55 |
| IPCL | Reliance Petroinvestments | 26 | 1,491.00 |
| Jessop & Co | Ruia Cotex | 72 | 18.18 |
| VSNL | M/s Panatone (Tata Group) | 25 | 3,689.00 |
The sale will be undertaken through the Department of Disinvestment and “will help arrest further drain of public money and ensure economic growth of the company and its employees”, said a government statement .
The government will take Parliament’s approval for the sale.
Banks, financial institutions, corporate bodies and others will continue to hold their 4.62 per cent stake. The government owns 95.38 per cent. The company’s market capitalisation is Rs 165 crore.
A number of companies are expected to bid as Scooters India owns 150 acres land, worth more than its accumulated loss of Rs 826 crore.
The heavy industries ministry had earlier indicated that competitive bids would be called.
Rajkot-based Atul Auto on Thursday expressed interest in buying the PSU. Many others, such as Mahindra & Mahindra, said they would examine the opportunity.
Last year, the ministry had approved sale of a 74 per cent stake. The then heavy industries minister, Vilasrao Deshmukh, had said Mahindra & Mahindra was interested in buying the company. However, the process was stalled due to opposition from other ministries.
Scooters India mainly manufactures three-wheelers. It has been incurring operational losses since 2002-03. By 2008-09, its net worth was eroded. It was declared sick in March 2009.
In 2009-10, its net loss was Rs 22 crore. The losses had been mainly on account of inherent inefficiency and low productivity compared to other players in the highly-competitive three-wheeler market, said the government statement.
The company’s disadvantages include old machinery, ageing workforce and poor systems. It is not able to meet salary expenses and pay the statutory dues of employees. Industry sources said 83 per cent of the machinery was built in the 1970s and 40 per cent of the 1,225 employees were aged above 55.
Scooters India has a 2.7 per cent share of the domestic three-wheeler market. The company sold 14,036 three-wheelers last financial year, an increase of 20 per cent over the 11,720 units it sold in 2009-20.
The company, incorporated in 1972, started commercial production of scooters under the brand name of Vijai Super for the domestic market and Lambretta for the overseas market. Later, it ventured into three-wheelers with Vikram. It stopped producing two-wheelers in 1997.
Scooters India shares on Thursday touched the upper circuit and closed 4.92 per cent up at Rs 38.40 on the Bombay Stock Exchange.
