Govt Stops Sale Of This PSU To Private Firm After Employees Revolt, Asks Court To Intervene
The government has halted the privatisation of Central Electronics Ltd (CEL) after the employees union took to the court to air their protests.
Sale Put On Hold
The company was to be sold to a little-known firm, Nandal Finance & Leasing, at an alleged under-valuation of Rs 210 crore.
Tuhin Kanta Pandey, Secretary of DIPAM which is running the privatisation process said that allegations of undervaluation are being examined.
As a result of the ongoing investigation, the Letter of Intent (LoI) for sale of 100 per cent government shareholding in CEL has not been issued and kept on hold.
A request for Expressions of Interest (EOI) for the company’s sale was issued by the government on February 3, 2020.
It received three preliminary bids.
Later on October 12, 2021, financial bids were received from two companies — Nandal Finance and Leasing Pvt Ltd and JPM Industries Ltd.
Nandal put up the winning bid which was higher than the ‘Reserve Price’ of Rs 194 crore.
The transaction was scheduled for completion by March 2022.
Protests Against Undervaluation
After the approval for the sale was given in November, the Peoples’ Commission on Public Sector and Public Services (PCPSPS) approached the Delhi High Court accusing that the company is being undervalued, among other concerns.
Opposition Congress also protested against the undervaluation, claiming that the actual figure using different methods was between Rs 957 crore and Rs 1,600 crore.
The undervaluation is a concern since the “proceeds from the disinvestment will be meagre compared to the real value of the assets sold”, said PCPSPS.
Govt Fires Back
The book value of CEL is Rs 108 crore and turnover is around Rs 200 crore.
Pandey questioned the allegations, asking how the company, having a book value of Rs 108 crore, could have a valuation of Rs 1,000 crore.
He cited their inconsistent profit earnings, some year earning Rs 20 crore profit and in another, just Rs 1 crore.
He said that the valuation was calculated by the transaction advisor and asset valuer after which the government arrived at the reserve price of Rs 194 crore.
Questionable Credibility Of Transaction Advisor
PCPSPS further expressed doubts over the credibility of the government’s transaction advisor, Resurgent India.
It is a Gurugram-based merchant bank appointed to advise the government on six transactions for strategic disinvestment of CPSEs, including CEL.
Case Pending Against Bid Winner
Another concern is that the two companies which put in the financial bids- Nandal Finance and JPM Industries- have one common director in group companies, making them interrelated.
The other is that there’s a case pending against Nandal Finance in the National Company Law Appellate Tribunal (NCLAT).
Wrong Fit For CEL
A major concern brought up is the competence or the lack thereof of Nandan Finance.
PCPSPS said that the company is a financial intermediary and lacks managerial or technological competence.
Therefore, it cannot be expected to bring technology and best management practices, which would “destroy and ultimately dismantle” CEL.
PCPSPS has appealed to the parliament to put the transaction on hold until it is “fully investigated” and “clarity emerges on the latest disinvestment policy of the present government”.