Bangalore: The Union government is drafting a plan to sell at least a 10% stake in India’s biggest ocean carrier, Shipping Corp. of India Ltd, or SCI, as part of its plan to garner Rs40,000 crore this fiscal through share sales in state-run firms, three people close to the matter said.
“We have had discussions with the disinvestment ministry on stake sale in SCI, and a proposal in this regard will soon be sent to the cabinet for approval,” a shipping ministry official said on condition of anonymity as he is not authorized to speak to the media.
The government holds 80.12% in the shipping firm.
SCI will also issue fresh shares in a follow-on public offer to raise funds to buy some 40 new ships over the next four years, spending $2.6 billion (around Rs11,700 crore), the official said.
The shipping ministry is discussing with SCI the number of fresh shares to be issued.
Proceeds from any secondary share sale in a state-run firm go to the government, while those from a fresh issue go to the company.
The ministry spokesman as well as B.K. Mandal, finance director of SCI, declined to comment.
The government is preparing for a share sale in SCI just when the global shipping market is showing its first signs of revival in 20 months.
The shipping market has been buoyed by the rising Baltic Dry Index, which reached a new high at 3,888 points on 11 May. The London-based index is a measure of costs for shipping dry bulk commodities such as coal, iron ore, steel and grains.
SCI runs a fleet of 77 ships of different types and capacities, accounting for 33% of the total shipping capacity of Indian firms. It also had Rs200 crore in a reserve account—as on 31 March 2009—that it can use to buy more ships.
As per the Tonnage Tax Act introduced in 2004, shipowners have to set aside 20% of their annual book profits in a reserve account and can spend the money only on buying ships—a norm prevalent in other parts of the world, too.
SCI has another cash corpus of Rs2,502 crore, according to the last published balance sheet of the company.
“These funds would be insufficient to fund our huge fleet expansion plans,” an executive at SCI said, requesting anonymity. As global banks are still reluctant to lend to the shipping sector, SCI will have to put in more equity from its pocket to buy ships.
The firm is currently evaluating offers to buy nine ships of different types and capacities to take advantage of the fall in ship prices globally.