Govt to completely exit CMC, to sell residual 26% to Tatas

New Delhi: The central government has initiated the process of exiting completely from CMC by selling its residual 26-per cent stake in the company to Tata Sons, the strategic partner.

The deal signals the government's resolve to press ahead with the sell-off process in companies other than the two oil majors, HPCL and BPCL. The standoff between two groups within the union cabinet on the sell-off of these two oil companies had severely dented the image of the government.

The management control of CMC was handed over to Tata Sons on 16 October 2001 through sale of 51-per cent equity for a consideration worth Rs 152 crore at Rs 198 per share. With one year of the strategic sale nearing completion, the government has decided to exercise its put option on the residual 26 per cent stake in CMC any time after 16 October 2002, disinvestment ministry sources say.

The shareholders' agreement signed with Tata Sons had provided a put option right to the central government for selling its residual 26-per cent stake in CMC to the existing strategic partner after one year of the strategic sale.

“We have started compiling data on the share price of CMC in order to arrive at the price for selling the 26-per cent stake,“ the sources add. “The disinvestment ministry will approach the cabinet committee on disinvestment with a proposal to sell the residual 26-per cent stake in CMC to Tata Sons after firming up the price.“

While the Tatas had paid Rs 198 per share to the government for the 51-per cent stake, it had to fork out Rs 280 per share during the open offer that ensued. As per the practice followed by the government for all disinvestment deals, the residual stake is sold at either the strategic sale price or the fair market value, whichever is higher, determined on the basis of the net asset value, discounted cash flow and the price / earning multiple valuation methodologies.