Dredging Corp to yield little through divestment

Govt plans to sell 5% stake of its 78.5% holding in the company, the sale will yield Centre Rs 58 cr

Divestment in the Dredging Corporation of India (DCI) might not yield the government value for its shares.

The government plans to sell a five per cent stake of its 78.5 per cent holding in the company. The sale will yield the Centre Rs 58.3 crore at DCI's Tuesday closing price of Rs 417 a share on the BSE.

Various ports owe DCI Rs 489 crore. Dredging dues for the Sethusamudram project takes the dues to Rs 650 crore. Kolkata Port Trust (KPT) owes over Rs 161 crore.

"With DCI's valuation, a five per cent stake sale to meet the fiscal deficit is palliative. A block sale with a strategic investor makes more sense if only five per cent is to be divested," said Hemant Bhattbhatt, chief executive of HMSA Consultancy Services.

KPT, which provides assured business to DCI because of its river port, has been affected by cuts in its dredging subsidy. "Dredging costs have traditionally been paid by KPT's subsidies. With the subsidy decreasing, the costs of capital and maintenance dredging are getting unbearably high," a highly placed KPT official said.

DCI is the only state-owned company that provides dredging services in the country. Capital dredging is done to create new channels or deepen existing ones and maintenance dredging to maintain the depth at existing levels.

A total of 675.25 million cubic metres (mcm) and 429.99 mcm had been planned for capital and maintenance dredging, respectively, for all ports in the country in the 11th Five Year Plan. Only 278.93 mcm and 291.63 mcm were achieved, a shortfall of 58.69 per cent and 32.18 per cent, respectively.

The majority of DCI's 16 dredgers are nearly obsolete. Only five have been manufactured after 2009. Its oldest dredger dates back to 1975.
DREDGING DRUDGERY

• Government likely to divest five per cent stake in Dredging Corporation of India (DCI), bringing it down to 73.5%
• DCI desperately needs more finances to buy dredgers
• Recovery of dues is a major hassle, with close to an amount of Rs 650 crore. Major amount due for Sethusamudram project and from Kolkata Port Trust
• A block-sale transaction from a strategic investor could be a better option than normal divestment