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Our Bureau

Mumbai Aug 6 The CIDCO-Videocon land deal, which kicked up a political storm within the ruling Congress-led coalition in Maharashtra over the price the State Government is offering the land to the electronic goods maker to set up a semiconductor project in Navi Mumbai, may have to face stormier days ahead.

For, it appears that land valuation is not the only grey area in the deal — the valuation of CIDCO’s 26 per cent equity in the joint venture company is also likely to come under the political scanner.

Analysts say that Videocon’s option to buy back its partner CIDCO’s 26 per cent equity for Rs 910 crore, according to the joint venture agreement, is also under-valued, given the fact that the project is to be set up with an investment of Rs 8,000 crore.

CIDCO, the infrastructure development arm of the Maharashtra Government, had proposed to establish a joint venture company with Videocon for setting up the country’s first TFT-LCD semiconductor project in the country.

According to the proposal, CIDCO will have a 26 per cent equity participation in the joint venture, while Videocon will have 34 per cent and the balance will be through a public issue at a premium of Rs 25 per share.

A State Government release said that the valuation of 100 acres of land of CIDCO at Navi Mumbai required for the project is Rs 300 crore, out of which Rs 260 crore will be CIDCO’s equity contribution and Rs 40 crore will be received in cash.

The valuation of the land for the project has sparked off a controversy, with some ministers, including the Revenue Minister, Mr Narayan Rane, asserting that the land was being given to Videocon at a throwaway price.

Apart from the land valuation, it now appears that the valuation of CIDCO’s 26 per cent stake in the joint venture is also fuzzy in the proposed partnership.

The Government release points out that “if fully developed the realisation from this land could reach up to Rs 792 crore over a period of time.”

The release further said: “At CIDCO’s option, the joint venture partner Videocon will buy back CIDCO’s equity for Rs 910 crore. The net present value of Rs 910 crore, coupled with the Rs 40 crore to be received in cash, will cover the value of the undeveloped land being made available by CIDCO to the joint venture.”

Analysts feel that Videocon’s option to buy back CIDCO’s equity for Rs 910 crore is under-valued, especially as a time-frame has not been given. For, once the Rs 8,000-crore project starts operations, CIDCO’s 26 per cent stake in the company would have a much higher valuation.

More Stories on : Hardware | Infrastructure | Politics | Maharashtra

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