Buyers Shy Away, Govt Drops Sell-Off Plan For 6 Firms

Disinvestment programme is heading for trouble. Not only the sale process is facing roadblocks in case of big ticket cases like Air-India and Indian Airlines, a number of smaller companies slated for divestment have been dropped from the list.

The department of disinvestment (DoD) has called off divestment in six companies, mainly due to lack of interest shown by the potential buyers.

The companies are: Hindustan Insecticides Ltd (HIL), Scooters India Ltd (SIL), Bharat Leather Corporation (BLC), Bharat Pumps and Compressors Ltd (BPCL), Praga Tools and Reyrolle Burn. Five of these companies were referred to it by the heavy industry ministry.

While in case of SIL the DoD has decided to take up the sale issue again at a later date, it has called off the privatisation process for the other companies.

After Piaggio's withdrawal from the fray for the government stake in SIL in December 2000, the DoD had restarted the process of eliciting interest in the company. However, the down swing in the auto market coupled with the fact that most of the Indian companies had already expanded their capacities ensured that there was no response from bidders.

Moreover, excess manpower and substantial investment requirements acted as dampeners. The sale process for 74 per cent government equity has therefore been postponed to a later stage, when market conditions improve.

In four of the remaining five companies, the process was called off as no potential buyers could be identified. In case of HIL, two bidders, who had expressed interest in picking up the government stake, subsequently pulled out citing the nature of the products and the surplus manpower.

While in case of Reyrolle Burn, which produces of high-tension switchgears and components, three interested parties pulled out; no bidders came forward at all in case of BPCL and Praga Tools.

For BPCL, a wholly owned subsidiary of Bharat Yantra Nigam Ltd, advisors have recommended financial and operational restructuring and rationalization of workforce before attempting privatisation.

Among the factors responsible for lack of interest in the company, which produces centrifugal pumps, compressors and gas cylinders, is its continuing weak financial position, eroding market share and location of the plant in Allahabad region.

In case of BLC, the cost of closure of the company works out to be less than that of sale of the company. The government has therefore decided to close the unit.