India’s Top Shipping Company Set to Kick Off Privatization Push
At least five maritime operators are in talks with the Indian government to buy a majority stake in the country’s biggest shipping company, which could be among the first public entities to be sold in the country’s biggest ever privatization drive.
The sale of the state-run Shipping Corp. of India, which controls up to a quarter of the country’s waterborne tonnage, is seen as a test case for bigger privatizations down the road after years of small divestments and growing pressure on India’s government to replenish depleted state coffers after Covid-19 imposed lockdowns.
Prime Minister Narendra Modi last month launched a fast-track program to sell state assets that could bring in around $25 billion.
Tuhin Kanta Pandey, the secretary at India’s Department of Investment and Public Asset Management, said the government is talking to potential buyers for its 63.7% stake in the shipping company, which operates a fleet valued at more than $1 billion, according to London-based maritime data provider VesselsValue. Official bids are expected over the next three months and the sale could be completed by next year if the offers are deemed satisfactory.
But the process could be delayed by opposition groups and court rulings that have pushed back or derailed several attempts to privatize state entities over the past years. The government first tried to privatize SCI in 2017, but the sale was canceled after pushback by various bodies, including the ministry of shipping.
“Selling the house silver has been traditionally anathema in India,” said a senior government official directly involved in the process. “But we now have a number of solid expressions of interest for SCI and we are already working on a potential shortlist. I believe the sale and the transfer of management can be sealed over the next 12 months.”
Bankers and other people working on the sale said the government is talking to at least five potential bidders.
People familiar with the process confirmed three of those: Piscataway, N.J.-based Safesea Group, which runs a fleet of tankers and inland logistics services; Great Eastern ShippingCo. , India’s biggest private vessel operator; and Belgium-based Exmar NV, which operates gas carriers and provides offshore logistics services for the energy industry. These people said two other potential bidders are Vedanta Ltd. , an Indian mining company and oil-and-gas producer, and a consortium led by Dubai-based Foresight Offshore Drilling Ltd. and GMS S.A., a ship recycler also based in Dubai.
The people involved in the sale said Exmar, GMS and Foresight might come together for a single bid.
“We know that some of the potential bidders are discussing joining forces for a single offer,” the Indian government official said. “We don’t know if that will bring in a higher bid.”
The deadline for expressing interest in SCI expired on March 1.
The operator runs about 60 vessels in a range of sectors, including very large crude carriers, product tankers and gas carriers, container ships, ferries and bulk-commodity carriers. It also owns premium property in Mumbai, including its 19-story headquarters. The company is listed on the local bourse and has a market capitalization of around $800 million.
A senior executive from one of the potential bidders said the main attraction is the four natural gas carriers that SCI operates.
“India is a humongous market with potentially explosive growth potential after Covid,” this executive said. “SCI has a solid group of gas customers and the government is pushing hard for the LNG portion of the country’s energy supply mix to be increased to 15% from 6% now. That’s a tremendous boost and SCI is looking to order more gas carriers.”
Privatizations in India are often complicated, with many senior politicians standing steadfast against any state divestment. India has a vast public sector providing tens of millions of workers with relatively secure employment and better-than-average salaries and working conditions.
Mr. Modi’s plan to privatize dozens of companies involves selling stakes in other state majors like Air India Ltd., Bharat Petroleum Corp. , Container Corp of India, Industrial Development Bank of India and others. Finance Minister Nirmala Sitharaman said at her budget speech in February that those sales could be completed by next year.
This article originally appeared on Wall Street Journal