The government has invited initial bids on Tuesday to privatise Shipping Corporation of India Ltd (SCI) by selling its 63.75 per cent stake, but kept potential bidders guessing on certain key deal terms which will have a significant bearing on their decision to participate in the process.

The successful bidder will be required to undertake obligations relating to employee protection, retirement policy, including VRS, asset stripping, business continuity, lock-in of the shares acquired in the transaction, bearing Indian flag on vessels or flagging out ships to tax-friendly jurisdictions etc, post privatisation.

But, these conditions and those relating to the responsibilities and liabilities of the successful bidder and the consortium members will be specified in the request for proposal/share purchase agreement, the Department of Investment and Public Asset Management (DIPAM) said in the preliminary information memorandum for inviting expression of interest for the sale.

“Those are the main things that will help in deciding whether to put in a bid or not,” a shipping industry executive said.

Diverse assets

Shipping Corporation’s diverse portfolio of assets is also seen as a potential deal-breaker because it is rare to find global shipping firms with such varied ship types who would be interested in the company as a whole.

SCI owns one-third of India’s shipping capacity and runs a fleet of 59 ships that includes two container ships, 13 crude oil carriers, 15 dry bulk carriers, 1 LPG / ammonia carrier, two multi-purpose supply vessels, eight off-shore supply vessels, 13 product carriers and five very large crude carriers. The deal does not include the non-core assets (real estate) of the company located at Mumbai and Kolkata.

Industry sources reckon that only Great Eastern Shipping Co Ltd, India’s biggest private ship owner, among local fleet owners, is expected to participate in the bid.

However, a spokesperson for Great Eastern Shipping declined to comment on a potential bid.

Eligibility criteria

Central Public Sector Undertakings and Central government-owned cooperative societies (where government ownership is 51 per cent or more) are not eligible to participate in the transaction. However, the management/employees of SCI are allowed to participate in the bid, if they meet the eligibility criteria, including a net worth of at least ₹2,000 core, as applicable to other bidders.

“This is an interesting scenario,” said Santhakumar Pai, Vice-President, Shipping and Logistics at Emirates National Petroleum Company, UAE. “They have an opportunity to become ship owners along with 700-plus employees if they wish to and emerge successful,” Pai, a former SCI employee, added.