Congress to challenge West Bengal govt’s sale of shares in Metro Dairy JV
Kolkata: The opposition Congress party is preparing to legally challenge the recent sale of the West Bengal government’s stake in a joint venture dairy firm, alleging that the state did nothing to realise the fair value of its stake. The party is giving final touches to a public interest litigation (PIL) to be filed at the Calcutta high court, leaders said.
In August, the state cabinet approved the sale of the West Bengal government’s 47% stake in Metro Dairy Ltd to its private partner, Keventer Agro Ltd, the lone bidder, for Rs84.5 crore. Keventer already owned 53% in the dairy, which clocked Rs306 crore in revenue and Rs17.4 crore in net profit in fiscal year 2016. A reserve price of Rs84.43 crore was determined for the share sale, according to the information memorandum released by the state government.
State government officials refused to speak on the matter, saying the decision to sell shares in Metro Dairy was approved by the state cabinet. Because Keventer Agro was already in control of the company, it isn’t surprising that no one else bid for the government’s substantial but minority stake in the firm, they said, asking not to be named.
Congress leader Adhir Ranjan Chowdhury, a member of the Lok Sabha, said his party will soon file a PIL challenging the sale. “Because it is a very big scam, it is taking time to figure out all details and collect all documents,” he said, adding that the party has been working on it for a little over a month.
Keventer Agro’s managing director Mayank Jalan wasn’t available for comments. Calls made to his mobile phone and text messages remained unanswered.
It has now emerged that Keventer Agro did not have “any lien” on the state government’s stake, which means the private partner did not have any preferential right to the shares sold by the state government, said a lawyer associated with the Congress party. “The state chose not to follow best practices resulting in sub-optimal realisation,” said this lawyer, asking not to be identified.
The state should have asked for listing of Metro Dairy’s shares and exited through an initial public offering (IPO), according to this person. “There couldn’t have been a better year than 2017 for IPO,” he said. More than Rs65,923 crore have been raised through IPOs so far in 2017.
An IPO would have also addressed Metro Dairy’s own fund needs for expansion, he added. The state government had said in the information memorandum that Metro Dairy needs “significant investment” to augment production capacity and regain its lost pole position.
The state government was the dominant shareholder with its 47% stake in the joint venture until the National Dairy Development Board sold its 10% stake in the company in March 2001 to ICICI Bank. This stake eventually wound up with Keventer Agro, giving it control and turning the company into one of its subsidiaries.
Within a month of acquiring the government’s shares in Metro Dairy, Keventer Agro sold 15% in itself to Singapore-based private equity fund Mandala Capital for $25 million, or around Rs170 crore. “We are closely examining if the government’s share sale in Metro Dairy helped Keventer Agro secure the investment from Mandala Capital,” said the lawyer cited above.
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