Visakhapatnam Port Trust, Paradip Port Trust and New Mangalore Port Trust will be exempted from making a mandatory open offer under the Securities and Exchange Board of India regulations when the three Central government-owned port trusts buy a controlling stake in Dredging Corporation of India (DCI), according to a government official briefed on the plan.

The is because the deal between two Central government-owned entities would not result in a change in control – and DCI will remain with the government. This will be the second such instance in recent times when the public shareholders have been given the go-by during the disinvestment of a government firm.

State-owned oil explorer ONGC Ltd was exempted from making the mandatory open offer when it bought HPCL early this year.

“We understand that since it is a government-to-government deal, the open offer will not be necessary,” the official said, asking not to be named.

Besides, an open offer would have reduced the public shareholding in DCI to below 25 per cent from the current 26.53 per cent, thereby violating a SEBI rule for listed firms, including PSUs, to have a minimum 25 per cent public float to ensure wider public participation. Of the public holding, individuals hold 13.53 per cent and insurance companies 6.71 per cent, while banks and financial institutions have 1.91 per cent.

Competition concerns

While the deal between the three major port trusts and DCI is seen as “politically convenient” for the National Democratic Alliance (NDA) government, competition concerns also played a part in the plan.

DCI is India’s biggest dredging contractor by fleet size and market share, and selling the company to a private dredging entity would have raised concerns about market dominance and abuse, the government official mentioned earlier said. Hence, the deal would have faced hurdles from the Competition Commission of India, he added.

The panel constituted by the Shipping Ministry will recommend the finer details of the block sale, including the quantum of stake to be bought by each port trust in DCI.

The official said the pricing of shares would be based on the report of the asset valuer, Protocol Insurance Surveyors and Loss Assessors Pvt Ltd.

The deal is expected to fetch ₹1,500 crore to the government’s divestment corpus at the current share price of the company.

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