BSNL, CIL set to go off divestment list for now

NEW DELHI: BSNL and Coal India are not part of the list of dozen odd state-run firms that are slated to hit the market next fiscal, with the government worried that the current valuations of the telecom major and the mining firm are nowhere near their potential.

The disinvestment department estimates that BSNL will be able to command a valuation of only around Rs 58,000 crore, which is just about half of what it was valued in 2008, said a finance ministry official. Coal India will have a market value of over Rs 75,000 crore, much lower than what the government thinks the company should be commanding, he said requesting anonymity. The government would now want the two firms to tap capital markets only after a major restructuring aimed at unlocking their potential value, said another official at the finance ministry.

BSNL, the telecom firm that runs fixed and mobile telephony services across India except the metros of Mumbai and Delhi, is sitting on cash reserves of more than Rs 40,000 crore. However, the firm has been making huge operating losses in the past two years, and has evaded the red so far only because of the interest it earns from its reserves. The firm ran out of capacity to expand cellular services nearly 18 months ago, and no new major contracts for mobile networks and equipment have been awarded in the past 24 months.

Coal India, one of the largest companies in the world engaged in coal production, has a cash pile of around Rs 5000 crore. Although the coal ministry has repeatedly stated that the mining major will be tapping the market towards the end of the next fiscal, the disinvestment department believes that a complete overhauling of the company is needed including hiving off some of its subsidiaries.

Meanwhile, the prime minister’s IT advisor, Sam Pitroda, told reporters in Mumbai that "there is no move to merge BSNL and MTNL”. However, the government is considering selling a part of its stakes in BSNL and will move in quickly in that direction, he added.

Disinvestment secretary Sunil Mitra will meet the heads of close to 14 government-run companies that are expected to hit the market next fiscal year, reflecting the sense of urgency among policymakers to pursue the government’s plan to raise funds for its social sector programmes. The meetings will be held in the last week of January and the first week of February.

The department feels that government companies lack the expertise needed to restructuring balance sheets and assets to make them palatable to the equity markets, and the meeting will discuss steps to be taken to command high valuations. The department has also finalised a list of 26 PSUs for divestment over the next two financial years.

According to Prithvi Haldea, CMD of Delhibased Prime Database, a portal that tracks capital market activity, to build a robust pipeline of PSU issues, the government has to work well in advance as it is a long run process to identify companies that are compliant with the regulations.

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Absorption of ITS: Secy/DOT informed that fresh Cabinet note on this important issue is under active consideration and is likely to be sent to the Union Cabinet very shortly. He further mentioned that he was fully conscious of deciding this important issue as quickly as possible.

Govt to identify more PSUs for selloff for next 2 yrs

After the planned divestment in four more public sector enterprises this fiscal, the Centre will identify more candidates for public offers for the next two years.
The Government is also planning to change the criteria of appointing investment bankers so that only those advisors with deep-pockets do not qualify for this purpose, an official close to the development said.

The Government plans to divest stakes in NTPC in the last week of January or early February, followed by REC just before the Budget (likely on 26th February), NMDC by 10th March, and Satluj Jal Vidyut Nigam by the end of March, which will together fetch around Rs 30,000 crore to the Exchequer.

"After we are through with these disinvestment plans, we will identify public sector enterprises where the Government could offload its stakes in the next two years," the official informed.

The Disinvestment Department has already asked 32 nodal ministries to identify state-run firms where the government stake could be sold, a senior official had said earlier.

As per the recently cleared criteria by the Cabinet, around 60 PSUs, including MMTC, BSNL, Neyveli Lignite Corp, Engineers India, State Trading Corp, Rashtriya Chemicals and Fertilisers, National Fertilisers and Andrew Yule, are eligible for stake sale.

Also, the Department will approach the Central Vigilance Commissioner to allow it to change the criteria of choosing investment bankers from just cost-basis to quality-cum-cost basis, the official said.

PM forms committee to arrest BSNL s falling revenues

Concerned over deteriorating financial health and competitiveness of state-run telecom firm BSNL, the govt has constituted a high-level committee, headed by Sam Pitroda and Deepak Parekh as member, to look into the issues and give recommendations within a month.
This was decided at a meeting chaired by Prime Minister Manmohan Singh last week to review the performance of two telecom PSUs BSNL and MTNL.

"There was an agreement that the situation of BSNL required immediate action to address both the short as well as long term issues affecting its financial health and competitiveness," the Prime Minster s Office (PMO) said in New Delhi on Sunday.

On the position of another PSU MTNL (that offers services only in two metros of Delhi and Mumbai) was comparatively better and the issues concerning it be considered in the normal course, separately, it added.

The committee, headed by Pitroda, Adviser to PM on Public Information Infrastructure and Innovation, would also look into BSNL s ongoing Rs 35,000 crore GSM expansion tender.

The tender has been marred by controversies and is in limbo since last more than a year and the PSU has not been able to place the order affecting its market share in the fastest growing mobile telephony.