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NEW DELHI, April 16

THE Union Government will offer requisite number of shares to the public from its residual holding of 26 per cent to ensure continued listing of shares of Shipping Corporation of India (SCI) after privatisation through the induction of a strategic partner.

If this event occurs, the Government's residual holding in SCI will fall below the 26 per cent level. This implies that the affirmative voting rights available on 26 per cent Government holding and special resolution issues would cease to be available to the Government. However, the affirmative rights available up to 15 per cent holding by the Government would be applicable.

A decision to this effect was taken by the Cabinet Committee on Disinvestment (CCD) at a meeting held here on Tuesday to overcome the possibility of SCI shares getting de-listed from the bourses in the wake of the open offer by the successful strategic buyer.

The move to ensure continued listing of SCI shares on the stock exchanges is basically aimed at providing an avenue to the company's employees to realise some value out of their stock options.

"The stock options will remain just a piece of paper if the employees are not able to realise some value out of these shares," sources in the Shipping Ministry said.

The Union Government will offer 3.12 per cent of its stake to SCI employees as stock options after completion of the strategic sale at one-third of the market price or the price offered by the strategic buyer whichever was lower, but not below the face value of Rs 10. The stock options will have a lock-in period of one-year.

As per the take-over code stipulated by the Securities and Exchange Board of India (SEBI), the successful strategic buyer will have to make an open offer for buying another 20 per cent of SCI shares from the public.

The Government currently holds 80.12 per cent in SCI, out of which 51 per cent is being sold to a strategic partner. After acquiring the 51 per cent stake from the Government, the private entity would have to make an open offer for the remaining 19.88 per cent shares held by the public. Assuming that the public tenders most of their holdings during the open offer, the public holding in SCI would fall below the 10 per cent minimum threshold level stipulated by SEBI for listing purposes.

The CCD also rejected a proposal made by the Core Group of Secretaries on Disinvestment to do away with the put and call options while privatising SCI. "The CCD decided to retain the put and call options under the revised transaction," the sources said. The Core Group's recommendation was based on a demand from some of the bidders who apprehend that the Government may continue to call the shots in running SCI even after management control is handed over to a strategic partner by virtue of holding a 26 per cent stake.

The CCD also decided to permit pledging of shares with the lenders but on the condition that the pledge cannot be invoked in the first 12 months of the creation of pledge by the lender.

Besides, invocation of the pledge by the lender to itself or to a third party would be subject to a deed of adherence being entered into by the lender or the third party concerned. Moreover, the transfer of the pledged shares to a third party within two years from the invocation of pledge would require the prior approval of the Government.

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