Financial Daily from THE HINDU group of publications
Friday, Feb 15, 2002
Industry & Economy - Disinvestment
Price bids for Jessop today
NEW DELHI, Feb. 14
THE Union Government's bid to privatise the Kolkata-based Jessop & Company Ltd, a sick company referred to the BIFR, will be on test when financial bids are invited on Friday.
In all, five bidders are understood to be in the fray for acquiring 72 per cent of the Government's stake in Jessop & Co, a subsidiary of Bharat Bhari Udyog Nigam Ltd.
This will be the second heavily loss-making company to be put on the block for privatisation through the induction of a strategic partner after Paradeep Phosphates Ltd (PPL).
The shares of Jessop & Co are listed on the Calcutta Stock Exchange, but trading is infrequent since the free float is low.
About two per cent of Jessop's shares is held by private individuals and the rest is owned by the Union Government.
The stock price was currently hovering around Rs 8 per share, sources said.
With the aim of making the company attractive to the bidders, the Cabinet Committee on Disinvestment (CCD) had last month cleared a financial restructuring package for Jessop & Co.
The scheme involved writing off/waiver of the Government loans and interest and infusion of fresh funds. Besides, the Government also decided to extend purchase price preference to Jessop & Co for two years after privatisation.
This will be in the form of orders for building 36 EMU coaches per annum for the Indian Railways as well as a wagon order reservation of 8 per cent per year out of the PSU quota.
The purchase price preference will, however, be subject to the company matching the price of the lowest bidder in the open tendering process.
The CCD had also decided to link the implementation of the financial restructuring scheme to the successful privatisation of the company.
As on March 31, 2001, the net worth of the company was a negative Rs 270 crore. ``By deciding to write off losses, the Government will offer the company on a clean slate to the successful bidder'', the sources said.
The Union Government hopes to turn the company around through the induction of a strategic partner. ``Jessop has good potential to prosper with the kind of infrastructure at its disposal.
All it needs is a good strategic investor who will have management control'', the sources remarked. The company is engaged in design and manufacture of a diversified range of products such as railway rolling stock, earth moving equipment, cranes, structural fabrication, hydraulic gates and paper machinery.
However, the sources said that the high employee strength (Jessop has about 1,500 workers) plus the political climate of West Bengal, the bastion of trade unionism, may prove to be a dampener to the privatisation plan of the Union Government.
The employees of BIFR-listed engineering PSU, Jessop & Co, are aggrieved that money received from the sale of surplus land to the Metro Railways has not been set aside for paying the gratuity of employees.
Mr A. Brahmachari, Joint Convenor of the Unions & Associations of Jessop, said the issue figured at the meeting of the inter-ministerial group (IMG) on Jessop held on February 11 in New Delhi.
Mr R. P. Singh, Chairman of Bharat Bhari Udyog Nigam Ltd, (the holding company for Jessop), however, said the BIFR's permission had been sought for utilising the Rs 14 crore earned from sale of this plot of land at Dum Dum. The funds would be used as the company's working capital.
He scotched the rumour that the IMG had decided to keep this money reserved for the highest-bidding strategic partner that the Government would choose for the company. The process of disinvestment had begun for Jessop and four companies have been shortlisted.
Meanwhile, Jessop unions have steeled themselves to fight the privatisation move, with the general secretary of the All India Trade Union Congress, Mr Gurudas Dasgupta, picking up the cudgels on their behalf. In a letter written to the Prime Minister, Mr Dasgupta said the unions and the workers were ready to co-operate with the Government if it reconsidered its decision on privatisation and undertook to revive the unit.
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