The department of investment and public asset management (DIPAM) has extended the last date for submission of bids for strategic disinvestment of Ferro Scrap Nigam Ltd., a 100% subsidiary of MSTC Ltd., under the ministry of steel, by a month to June 6, and has clarified that the company is in the process of getting its existing contracts extended.
The department, in a series of clarifications to interested bidders, said the company was in the process of getting extension on the existing set of contracts ending within FY23. Bidders had sought clarity on the duration of these contracts since they would be required to decide whether to bid for the PSE and arriving at the return on investment for those bidding.
“To calculate the ROI it would be of prime importance to know whether the contracts specially at the SAIL plants would be automatically awarded to the successful bidder and extended by Minimum of 5 years,” the bidders had highlighted.
The department also clarified that the successful bidder would be required to undertake some obligations relating to employee protection, business continuity, asset stripping, lock-in of the shares acquired in the transaction, and or shareholding of consortium members in the special purpose vehicle. The conditions will be specified at the request for proposal or RFP stage, it added.
The clarifications were issued in response to queries on whether the winning bidder will have to retain and continue with the entire staff strength of 130 executives, 460 non-executives, 861 contractual workers, and subcontractors engaged by FSNL.
The government has started the process of divesting its full shareholding in FSNL held through MSTC Ltd. in a strategic sale, where management control will also be given up in the profit-making central public sector enterprise.
The government has appointed BDO India Ltd. as the advisor for the transaction. The government will inform shortlisted bidders by 27 June, instead of the earlier date of 25 May.
The Cabinet Committee on Economic Affairs had in October 2016 given ‘in-principle’ approval to disinvest entire equity shareholding held through MSTC in FSNL, through strategic disinvestment and transfer of management control.
FSNL is a Mini Ratna II CPSE, a 100% subsidiary of MSTC, incorporated in 1979 to provide steel mill services including processing steel mills slag for recovery of iron scrap and other metallics. The company has nine steel plants in India, and specialises in the recovery and processing of scrap from slag and refuse generated during iron and steel making across different steel plants. It offers services for dig and haul of blast furnaces and steel melting shop slag at slag yards, processing of iron and steel skulls, mill rejects and maintenance scrap as per the specific requirements of its customers.
FSNL has become the largest recycler in India in terms of the volume of scrap and slag handled across multiple plants. For FY21, the company reported revenue of ₹352.74 crore and a profit of ₹22.75 crore. For the quarter ended September 2021, revenue was at ₹101.78 crore and profit was at ₹10.63 crore.
As on 30 September 2021, FSNL has a cash balance of ₹169.9 crore along with zero debt servicing obligation, according to the preliminary information memorandum issued by the government.
The government has set the divestment target for FY23 at ₹65,000 crore.
Source: Mint