No takers for Punjab Alkalies divestment

Third try in 10 years fails; state govt admits dallying on debt conversion plan probably turned away suitors, to mull options

The Punjab government has again deferred the long-delayed process of disinvesting loss-making Punjab Alkalies and Chemicals Ltd (PACL), promoted by it and listed on the Bombay Stock Exchange. There were almost no takers, admitted the disinvestment department, given the uncertainty on its debts.

A senior official said the inter-departmental committee to process the applications for taking stake in PACL had got only one bid, which was also not in order, from the 13 shortlisted companies. So, the matter would be referred to a core committee to decide what to do next.

 

Punjab State Industrial Development Corporation Ltd has 44 per cent stake in PACL. This was the third occasion on which the disinvestment department had begun trying to dilute the government stake in PACL. The first was in 2002, when none showed interest in purchasing stake. A second try was made in 2005; there was a change of government and the plan was given up.

According to the annual report, the company has total paid-up capital of Rs 20.50 crore. It had unpaid loans of Rs 59.1 crore, including accumulated interest, as on March 31, 2010. The main creditors were IDBI Bank (Rs 48 crore), IFCI (8.3 crore) and Life Insurance Corporation (Rs 0.5 crore).

The disinvestment department had invited technical and financial bids from 13 companies, shortlisted after evaluating their RFQ (request for qualification). “The department has received only one bid from DCM Shriram Credit & Investments Ltd, which was also not in order,” disclosed principal secretary, finance, K B S Sidhu. Among others shortlisted were Grasim Industries, Nirma, Jai Prakash Associates, Surya Pharmaceuticals, Bhusan Power & Steel, Goyal MG Gases and Kudos Chemie.

Govt admission On being asked about the cold response, Sidhu said: “Earlier, the creditors, IDBI Bank, IFCI, etc, had showed willingness to convert their loan component into equity, but the promoters of the company have asked to hold on for some time till disinvestment is completed. There is no clarity on the issue. Maybe the uncertainty over the equity stake of the creditor proved a dampener for the disinvestment. We will again go to the drawing board and decide the future course of action.”

Discussion on restructuring the company’s debt has been on for several years, between the promoters and the lenders. The proposal to convert part of the unpaid loans into equity had been accepted in principle, but a decision deferred repeatedly since 2006. In 2009, IDBI, IFCI, LIC and Punjab National Bank had expressed willingness to go ahead, but its operation has been repeatedly postponed.

According to officials in PACL there is no clarity on the issue, and those interested in taking stake have apprehensions of not getting enough time to repay the debt or being forced by lenders to hand over equity in lieu of loans. Sidhu said the core committee may also consider options to disinvestment, repeating: “The matter will referred to the core committee, which will decide the future course of action.”

PACl showed a loss of Rs 20.5 crore in the first nine months of 2010-11, as compared to a net loss of Rs. 13.3 crore during the corresponding period of the previous year. It had a net loss of Rs 22.4 crore in the year ended March 2010, as against a net profit of Rs 7.1 crore during the previous year ended March 2009.