NEW DELHI :
State-owned trading companies such as State Trading Corporation (STC), Project and Equipment Corporation (PEC) and MMTC will be shut down one by one as “the government has no business of remaining in such businesses", trade minister Piyush Goyal said on Tuesday.
“Slowly the original purpose of these public sector units have come to an end. It’s not the business of the government to remain in such businesses. The government should not run companies only for gold imports. We have started the discussion and will close them down one by one," Goyal told reporters at the sidelines of an event.
Press Trust of India news agency on Monday reported that the government was planning to close down STC and PEC.
Shares of MMTC Ltd and STC fell 16.6% and 19.6% respectively on Tuesday while Sensex closed 1.73% down, and Nifty 50 1.69% down.
Dipti Lavya Swain, Corporate M&A lawyer & partner at HSA Advocates said that while Cabinet approval is still to come, Goyal’s comments seem to suggest that post internal approvals and actions taken pursuant to a due diligence process, these companies will mostly likely be wound up.
“As these companies have made equity investments, unless regulated by joint venture contracts, these may be sold as going concerns. Listed entities will have to follow SEBI process along with winding-up requirements. STC will have to be pulled out of NCLT vide a deal with it’s lenders. Other options like demerger and selective asset sale may be lengthy and complex, which the government may avoid, but (they) cannot be ruled out until the final processes are ironed out," he added.
STC in its 2018-19 Annual Report said it is facing a “severe liquidity crisis" as all the lender banks have reported STC’s account as a bad loan due to non-payment of interest on the banking limits availed by the company. “Therefore, at present, the Company has no banking limits, funded or non-funded, available with it," it said.
The company reported a net loss (after tax) of ₹881 crore in 2018-19 compared with net profit (after tax) of approx ₹38 crore in 2017-18. The company had 441 employees on its rolls as of 31 March 2019, made up of 305 managers and 136 staff.
With a view to settling its outstanding dues, the company submitted a One Time Settlement (OTS) proposal to banks. After a series of discussions and meetings held with the Joint Lenders Forum (JLF) of banks, the broad terms of a settlement have been finalized.
Of the total dues of ₹1906 crore as of 31 March 2018, an amount of ₹1,100 crore has already been paid by STC. The balance is proposed to be paid partly through a sale of its immovable properties and partly out of the trade receivables to be realized by the company.
Meanwhile, in March, public sector lender Syndicate Bank initiated insolvency proceedings against STC for an amount of ₹625 crore.
“The company is in the process of entering into Master Restructuring Agreement (MRA) with the lender banks towards settlement of their dues," the company’s annual report said.
Meanwhile, at MMTC, the aggregate manpower as of 31 March, 2019 stood at 950, including 387 officers.
The company’s total turnover is ₹28,293 crore and profit after tax is ₹81.4 crore, up from ₹48.8 crore a year ago.
The PEC website has financial details only till 2014-15. The company made a net loss after tax of ₹208.5 crore in 2014-15 compared to ₹0.7 crore profit after tax a year ago.