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P. Manoj

NEW DELHI, Nov. 5

THE faltering privatisation exercise under way in Hindustan Copper Ltd (HCL) has given the Union Government a few good lessons on financial restructuring in loss-making PSUs and the most notable one is that such schemes should be finalised in consultation with the bidders to meet their expectations.

Birla Copper and Sterlite Industries Ltd, the two heavyweights in the domestic metals sector, which are keen on acquiring HCL, has told the Government's disinvestment managers in clear terms that the Rs 533-crore financial restructuring package approved by the Cabinet in June this year was "not adequate to make the company attractive and maintain bidder interest".

They want the Government to dole out a few more concessions to lead them to the bidding table.

The financial restructuring scheme cleared by the Cabinet Committee on Economic Affairs (CCEA) on June 11 involves conversion of non-Plan loan amounting to Rs 440 crore given for voluntary retirement scheme (VRS) into grant-in-aid, conversion of outstanding Plan loan of Rs 71.50 crore into equity and waiver of outstanding interest payable of Rs 21.72 crore.

The components of the financial restructuring scheme remain mostly on paper (except for downsizing in manpower through VRS) due to a Government decision that the implementation of such schemes in divestment-bound PSUs would be linked to its successful privatisation.

In accordance with the CCEA approval, the Government has reduced the workforce in HCL from around 12,000 to about 7,000. But Birla Copper and Sterlite want the Government to further reduce the manpower to a level of about 2,500.

The two bidders have also sought a counter-guarantee from the Government on the loan repayment obligations of HCL and prevent any glitches in the repayment schedules.

Given the downturn in the copper market combined with the lower tariffs on imported copper concentrates and the dismal state of HCL units at Khetri in Rajasthan, Ghatsila in Jharkhand and Taloja in Maharashtra, the bidders feel that making the company competitive and economical will be an impossible task even with the aid of the proposed financial restructuring scheme.

"The Malanjkhand complex in Madhya Pradesh is the only positive side of HCL. Except Malanjkhand, there is nothing of economic value in the company," a top official with one of the bidding companies told Business Line.

One of the earliest lessons the Government had learnt in its disinvestment programme was to make the financial restructuring packages of loss-making entities simultaneous with its privatisation to prevent throwing good money after bad.

"HCL has given us a new lesson: Discuss and finalise the financial restructuring packages in consultation with the bidders so that it is worth the while. If the bidders are not satisfied with the package, why waste time," says a senior official with the Disinvestment Ministry.

HCL could give the Government yet another moral wherein companies like HCL which has slim chances of being sold can be wound-up as a cheaper option by paying the employees a voluntary separation scheme (VSS).

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