25-12-2017

Centre scouting for asset-valuer for Dredging Corpn

Unperturbed by workers’ protests and agitations — including an employee reportedly ending his life — the Centre is proceeding with the privatisation of Dredging Corporation of India Ltd (DCI), seeking bids to hire a firm to value the assets of the Visakhapatnam-based company.

“The Government is considering strategic disinvestment of 100 per cent paid-up equity capital of the government in DCI (presently 73.47 per cent of the total paid-up equity) through strategic sale with transfer of management control,” said a tender document issued by the Shipping Ministry. “For this purpose, the Ministry...requires the services of a reputed asset-valuer to carry out the valuation of the assets of DCI.

Scope of work

“The broad scope of work for the asset-valuer is to carry out market valuation of marine assets (dredgers and ancillary crafts), land and buildings, furniture and fixtures, civil infrastructure like roads, drains, compound wall, etc and plant and machinery including electrical, stock inventory of spares in stores etc on an ‘as is where is basis’. The valuation is to be done keeping in view the objective of disinvestment and would be changed if there is a change in the objective.”

The BSE-listed DCI has 22 dredgers and ancillary crafts with 474 full-time employees, 1,035 contract workers and 332 trainees.

DCI employees have enlisted the support of local politicians to lobby the government for scrapping the privatisation plan, citing the “strategic importance” of the company.

“I feel it is against the safety and security of the nation considering the fact that DCI is the only PSU in the dredging field, which is of strategic importance and cannot be sold to private parties,” actor and Jana Sena Party founder Pawan Kalyan wrote to Prime Minister Narendra Modi recently.

Despite the initial enthusiasm shown by private dredging contractors, buying DCI would not make much business sense, according to dredging experts.

“DCI will be too expensive for buyers; the maths just doesn’t work out,” said a dredging industry executive. “A back-of-the-envelope calculation shows that it doesn’t make any financial sense for a buyer.”

At the current market price of about Rs. 686 a share, DCI is valued at around Rs. 1,800 crore. The buyer will also have to make an open offer and spend another Rs. 1,000 crore to bring the dredgers up to speed. “Instead of paying some Rs. 3,000 crore to buy DCI, one might as well buy new dredgers,” the executive said.

It would be impossible for a buyer to get a reasonable return on investment given that DCI does not earn more than Rs. 650 crore in a year, he added.

Government support

What would interest potential buyers, according to this official, is support from the government. This could be in the form of assured maintenance dredging work for DCI at all the major ports, on a nomination basis. A provision in the Centre’s dredging policy allows that.

“...Ministry of Shipping reserves the right to assign, in public interest, any contract for dredging work in any of the major ports to DCI on nomination,” according to the November 2015 policy.

Why private players may not be too keen on DCI

At Rs. 1,800 crore, the deal is considered very expensive

The buyer has to spend further on an open offer

Upgrading dredgers would require another Rs. 1,000 crore

The potential RoI is uninspiring, as DCI doesn't earn more than Rs. 650 crore a year

Govt support via assured contracts might sweeten the deal

Source: The Hindu Business Line

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