STC divestment to be taken up next week

The shareholders’ agreement for the privatisation of State Trading Corporation (STC) will be taken up at the meeting of inter-ministeri...

The shareholders’ agreement for the privatisation of State Trading Corporation (STC) will be taken up at the meeting of inter-ministerial group next week.

Meanwhile, the process for the demerger of STC’s subsidiary, Tea Trading Corporation of India Ltd (TTCI), has started and it will soon be finalised, said official sources. The transaction documents of STC pre-suppose the demerger of TTCI. The demerger has also found favour with the bidders — the Adani group, Videocon, Gaurav Dalmia and Essar.

Officials said that there is a possibility of STC privatisation in this fiscal, though it would be a little difficult. They said after the IMG’s nod to the transaction documents, the approval of the core group of secretaries on disinvestment would be required. This will be followed by a clearance from the Cabinet committee on disinvesment (CCD). Only after clearing the shareholders’ agreement, CCD would mandate the calling of financial bids for STC.

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The government is in the process of selling 51 per cent of its 91.03 per cent stake in STC to a strategic partner. Unlike in most privatisations, the government does not intend to retain 26 per cent equity in STC. After sale, the government will be left with 16 per cent shares, while 10 per cent equity would be offloaded in favour of the employees.

It may be recalled that the erstwhile Disinvesment Commission had recommended the sale of entire government equity in favour of a strategic partner, except 5 per cent to be sold to the employees.

Ernst & Young are advising the government on STC sale. The government had decided to hive off TTCI from STC, while retaining Spices Trading Corporation Ltd. The reason was that the activities of STC were similar to that of Spices Trading Corporation, whereas TTCI is into tea gardens. Besides, TTCI is a sick unit, with losses at Rs 569.24 crore in 1995-96, after which the company did not send its financial data to the department of public enterprises.

The ministry of commerce & industry, which controls STC, has already moved a Cabinet note for the demerger of TTCI. Official sources said STC privatisation was expedited when disinvestment minister Arun Shourie held the additional charge of the ministry of commerce.

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STC is a profit-making company, whose net profit stood at Rs 26.65 crore during 2000-01. The paid-up equity of the company is Rs 30 crore.