Government of Orissa
Department of Public EnterprisesCCD okays sale of IDCOL, Cement & Nayagarh Sugar
Bhubaneswar 02 December 2003: The Cabinet Committee on Disinvestment (CCD) today okayed the sale of IDCOL Cement Ltd. to Associated Cement Companies Limited (ACC), ACC will buy the 86.79% of Government share holding in IDCOL Cement at a total consideration of Rs.176.41 crores. Over and above this ACC, would also pay Rs.5.61 crores towards unsecured loans of IDCOL. ACC would also takeover loan and current liabilities of Rs.90 crores and contingent liabilities of about Rs.20 crores.
The Department of Public Enterprises, which is the nodal department for the ongoing disinvestments programme in the State, had advertised the sale of the Government’s shareholding in IDCOL Cement Ltd.(ICL) in November 2002. Although, preliminary interest was shown by seven parties, final bids came in from only three – ACC, Lafarge and OCL India Limited . After the bid from Lafarge was rejected on technical grounds, ACC, which is the second largest manufacturer of cement in India emerged as the preferred bidder with its initial offer at Rs.6.03 per share against Rs.3.00 per share from OCL. After three rounds of negotiations, the last round of which was taken up by the Hon’ble Minister of State for Finance and Hon’ble Minister for Public Enterprises & Industries, ACC revised its offer to Rs.7.67 per share.
The two Ministers had taken up the final round of negotiations with ACC based on the decision of the CCD on 20 November, on 20th November the CCD had also agreed to take up with ACC a plan for expansion. Hon’ble Minister for Public Enterprises and Industry today informed the CCD that ACC had agreed to expand the capacity of ICL to two million tones per annum within the next five years. In addition to capacity expansion. ACC also proposes to take up expansion of clinker capacity and set up a captive power plant soon after taking over the plant. The increase in clinker capacity is expected to be 35%.
ACC had also agreed to a no-retrenchment clause for all the 806 regular employees as well as 1355 supply and job contract employees of ICL for a period of two years. This, the Minister cited was an improvement over the Government of India’s model that offers no-retrenchment to regular employees only for a period for one year and excluded temporary and casual employees.
At the current price of Rs.7.67 per share, the reserve rice affixed for IDCOL cement has been met, and is higher than the recommended value as per valuations. The book value of each share of ICL was Rs.4.50, while the net adjusted asset value (calculated after allowing depreciation benefit for accumulated loss) per share was Rs.5.38. Based on asset valuation, the value per share was Rs.7,46 and the discounted cash flow value of each share was Rs.6.19 which was recommended by the advisers. However, the Inter-Department Core Group headed by the Principal Secretary of the Industries Department had affixed a reserve price of Rs.7.67 per share based on the inputs provided by independent experts from XIMB.
ICL has been continually making losses since 1994-95 (except in 1999-00 when it booked profits due to interest waiver as per BIFR scheme) and its accumulated losses have grown to Rs.150 crores by September 2003, In 2002-03, despite record capacity utilisation of 88%, ICL incurred a loss of Rs.21 crores. In addition to accumulated losses, ICL has an accumulated liability of about Rs.110 crores and the Government of Orissa has guaranteed bonds worth Rs. 151 crores raised by ICL which have become overdue for payment.
The CCD today also okayed the sale of Nayagarh Sugar Mill to ECP Industries Limited at Rs.5.22 crores. The Mill, which has remained closed since the last three years, is expected to be revived through this privatisation. The revival of operations at the mill will benefit more than 4,000 came farmer households in the region.
ECP Industries is an Orissa based industrial house with diversified interests & experience in operating plants and manufacturing units.
The Nayagarh Sugar Mill has never registered profits and has accumulated liabilities of about Rs.34 crores. The mill, when it was operative had a low recovery rate of 7.9% against the industry average of 9.7% and operated for an average of 51 days per annum.
Today’s CCD meeting was presided by the Hon’ble Chief Minister and attended by Hon’ble Ministers of Public Enterprise & Industry, Cooperation and Hon’ble Minister of State for Finance. Hon’ble Ministers for Excise and Higher Education attended as special invitees.
The decision to privatize both the units was taken by the Cabinet on November 14, 2002 along with eight other units, of which the sale of Assets & Business of Co-operative Sugar Mill , Baramba has already been approved by the CC.
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