Govt Plans To Go In For Strategic Partner In Cmc

In a major shift from its earlier stand, the ministry of information technology has decided to cancel the issue of additional equity of CMC Ltd to the public and, instead, offload part of its stake in the company to a private strategic partner, which can be a foreign infotech major.

The government is the largest shareholder in CMC with a 83.33 per cent stake.

"A final decision on this is to be taken soon," a government official told Business Standard. He said the government was reportedly in the process of giving the mandate to an agency to identify the partner.

 

Earlier, the government ruled out the possibility of strategic equity tieups with any international IT companies while divesting its stake in CMC Ltd. Instead, the government said it would offload the shares to the public.

However, according to the current plans of the government, the private equity partner will only have a minority stake in the state-owned enterprise. "The government will continue to hold a majority stake in CMC," the government source said.

"We are looking for a partner for CMC who will help us create a better brand and share-value for CMC," the source said.

Elaborating the decision to cancel the public equity issue, the source said, "This was done while the government was finalising its plan of action regarding CMC."

The company had reportedly urged the government to renounce its entire rights entitlement and place the shares with foreign institutional investors and other strategic investors to make the stock more liquid. But the government then turned down the proposal.

Currently, CMC has an equity base of Rs. 15 core, which was supposed to be hiked through an issue of 96 lakh additional shares, including 80 lakh shares for public offer and the rest for the employees' stock option plan.

In a move to exploit global opportunities, the company had announced the creation of three separate strategic business units for covering West Asia, Southeast Asia and Europe, in addition to the company's wholly-owned subsidiary in the US.