Opportunities for foreign investors in disinvestment programme

Vol 3, PW 23 (08 Dec 99) People & Policy

The partial privatisation of Indias state-owned companies will be the litmus test of the BJPs embrace of the free market.

Privatisation is also an area that offers potential opportunities for overseas multinationals seeking a strategic stake in a government owned company. Opportunities are now coming to light.

In recent days the government has let it be known it is looking for a strategic partner for the Shipping Corporation of India (SCI). The figure floating around is that it wants to offload 40% equity.

In the oil sector, meanwhile, the most obvious target for any overseas company is the Indian Oil Corporation (IOC) which - if the government is to be believed - will come to market in January next year with a GDR issue equal to 10% of its present equity. There is some speculation that the figure might rise to 15%, bringing the governments stake in IOC down from 82% to 67%, but this has not been confirmed.

What is not in doubt is that IOC managers do not want any of these GDRs to fall into the hands of a potential rival. In reality though, there is little they can do to prevent this if the rival acts through an independent investment arm, as British Gas and Enron acted when they bought small chunks of GAIL last month.

Another area of potential opportunity is in the divestment of the governments stake in three stand-alone refineries plants which have no independent marketing infrastructure: Madras Refineries, Cochin Refineries and Bongaigaon Refineries. Brokers at the Bombay Stock Exchange report a surge of interest in these three stocks, driven by a perception that the government is about to sell.

Excitement here, however, is premature. Will they be sold to IOC, Bharat Petroleum and Hindustan petroleum, as proposed by the Nitish Sengupta Committee or will they be sold to the highest bidder in the private sector A final decision is expected on release of the latest blueprint for the de-regulation of the Indian oil sector Hydrocarbon Vision 2025.