The Union government is planning to sell 25% stake in MSTC Ltd through an initial public offering this financial year, top company officials have said.
MSTC, a state-owned enterprise under the Ministry of Steel, provides e-commerce solutions to the government and also procures industrial raw material. The government currently owns 89.85% in it.
To expand its equity capital ahead of the proposed listing, the company recently issued bonus shares in the ratio of 1:1, taking its paid-up equity to Rs35.2 crore, A.K. Basu, director (finance) told reporters. The department of investment and public asset management has already issued tenders to engage transaction advisors for the stake sale, he said, adding the listing is expected this financial year.
The listing could lead to significant value unlocking for companies such as Tata Motors Ltd, Steel Authority of India Ltd, and Texmaco Ltd, which have small stakes in MSTC, said two officials, who asked not to be named.
The IPO will be a pure offer for sale, Basu said.
Ahead of the IPO, the Union government has advised MSTC to divest unit Ferro Scrap Nigam Ltd.
The company is looking to sell its entire stake in the subsidiary and has started the process of selecting transaction advisers. The sale of the unit, which provides services to at least eight steel plants, is estimated to fetch around Rs150 crore, the MSTC officials cited above said.
In 2016-17, MSTC helped conduct business volume worth Rs51,033 crore, up from Rs30,819 crore the previous year.
The target for the current year is Rs60,000 crore, said B.B. Singh, chairman, and managing director.
According to latest available data, the company reported a net profit of Rs59.88 crore, or Rs68 per share, on gross revenue Rs2,967.58 crore in 2015-16.
Alongside, MSTC is looking to buy 6-7 acres in the national capital region to set up an auto shredding plant under a 50-50 partnership with Mahindra Intertrade Ltd, an arm of Mahindra and Mahindra Ltd. The shredding unit along with collection centres to feed it is estimated to cost Rs120 crore, Singh said.
The shredded scrap produced by the joint venture will be fed to the secondary steel industry, Singh said, adding that the project is aimed at reducing import of shredded scrap.
India imports around 6 million tonnes of shredded scrap every year, valued at $1.8-2 billion.
Source: Mint