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Government Looking to Sell 51 Per Cent Stake in Dredging Corp

Posted on March 7, 2017

By Rajat Arora & Dheeraj Tiwari, The Econo

The government is looking to sell a 51 per cent stake in staterun Dredging Corporation of India.

A cabinet note has been prepared on this proposal and is being circulated among key ministries for comment, two senior government officials said.

“There is enough competition in this sector and therefore the role of a public-sector firm is limited,” said one of the officials aware of the deliberations.

The strategic stake sale should materialise by middle of the next fiscal year starting April, he said.

The government currently holds 73.47 per cent of the firm that provides dredging services to seaports, while state-run financial institutions hold another 13 per cent stake. Its shares closed at Rs 445.50 on Bombay Stock Exchange last week. On that price, a 51 per cent stake is worth Rs 636 crore.

Another government official said the Mini Ratna firm should raise interest among private players. “They can leverage on the existing strengths of the firm. It has also recently successfully bid for a project in Bangladesh,” he added.

The company reported a net profit of Rs 14 crore in the quarter ended December 31, compared with a loss of Rs 19.62 crore a year earlier.

An executive with the company said it was making a turnaround and it may not be a good idea to put it on the block now.

“Our total expenses have come down to Rs 134 crore; so there is an improvement. We have also recently secured an international contract through global competitive bidding and also forayed into inland dredging. The government should wait and let the company improve on its strength,” he said.

The government, however, is not convinced. “The firm’s income from operations has declined. A complete turnaround may take years,” said the second official cited earlier. The government has already allowed foreign direct investment in the sector, paving way for more stiff competition, the official added.

Dredging Corporation’s income from operations had declined to Rs 151.89 crore in the past quarter from Rs 161.40 crore a year earlier.

For 2017-18, the government has set a mammoth disinvestment target of Rs 72,500 crore, of which Rs 46,500 crore is to come from regular stake sales, including exchange-traded funds holding stakes in state-run companies, and another Rs 11,000 crore from the listing of three general insurers.

Pursuing its strategic sales programme, and to bring in consolidation among public-sector enterprises, the government has invited applications for engagement as advisers for seven firms which include Bharat Pumps & Compressors, Bridge & Roof Company and Hindustan Fluorocarbons.

Earlier, a committee set by government think tank Niti Aayog had recommended closure or winding up of 26 loss-making central public-sector enterprises.

Source: The Economic Times

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