The disinvestment of Container Corporation of India (CONCOR) has picked up pace in the last few weeks and the government is expected to invite initial bids for the state-owned transporter by August 1, multiple sources told.
“AM (Alternative Mechanism) approval has been sought for CONCOR EOI (expressions of intent). The three ministers’ file has been sent and approval will be sought. DIPAM (Department of Investment and Public Asset Management) has given the go-ahead. Depending on the approval, immediately EOIs will be issued,” a senior government official said.
The AM on strategic disinvestment consists of the Finance Minister, Minister for Road Transport and Highways and the minister representing the respective administrative department, to decide on the matters relating to terms and conditions of the sale. The alternative mechanism for CONCOR comprises ministers of finance, road transport and highways, and railways.
The official added that the Ministry of Railways is now on board for the divestment of CONCOR and all earlier issues have been resolved.
“Issues of the railway ministry have been addressed and railways is willing to go ahead with CONCOR EOIs, which is likely in a month’s time,” the official said.
Another executive close to the ongoing discussions told that the Ministry of Railways’ reservations about bringing on board a strategic investor into the company has been resolved.
“A high-level meeting between finance ministry officials, NITI Aayog and railway board members was held earlier this month (June) following which, the railway board has given its all clear,” the executive said.
The executive added that following the go-ahead by the Indian Railways, CONCOR has seen a rise in interest from private parties for the government’s 30.8 percent stake in the company.
“Interest for the government’s stake in CONCOR has risen in the past month,” the executive said.
CONCOR is in constant dialogue with 4-5 potential investors for its disinvestment and a meeting between the government and interested parties is being planned for the first week of August, sources said.
“Two more parties have shown strong interest in the government’s stake in CONCOR,” a second executive said.
Based on the company’s current market capitalisation, the 30.8 percent stake earmarked for sale is worth around Rs 12,000 crore.
Earlier, the interest of private players was diluted due to confusion around the railways’ land leasing policy CONCOR will adopt going forward and intensifying competition from private sector companies.
However, market experts and insiders suggest that CONCOR’s strong export-import (EXIM) volumes in the last quarter (April-June) and faster recovery of global trade have made the company a more attractive asset going forward.
CONCOR’s EXIM volumes grew by 2.21 percent at 8,51,261 Twenty Foot Equivalent Units (TEUs) in the March 2023 quarter, against 8,32,863 TEUs handled last year. Its EXIM grew by 4.22 percent to 34,06,864 TEUs in FY23 against 32,69,026 TEUs it handled in FY22.
CONCOR currently runs 61 inland container depots, of which 26 are on land leased from Indian Railways. These 26 terminals account for more than half of the annual revenue of the company. CONCOR is expected to pay land lease charges of Rs 450-490 crore for 2023-24 after it had estimated the payout at Rs 450 crore for 2022-23.
The cabinet in November 2019 had approved the strategic sale of a 30.8 percent stake, along with the transfer of management control, in CONCOR out of the government’s equity of 54.80 percent. The government will retain a 24 percent stake but without any veto powers.
The DIPAM had in October last year held roadshows to gauge investor interest, and has appointed L&L Partners as the legal advisor for the partial divestment. Deloitte Touche Tohmatsu India has been roped in as transaction advisor and RBSA Valuation Advisors LLP as asset valuer.
In September, the government came out with a new land leasing policy after market participants raised concerns over the land licensing fees being paid by CONCOR.
The cabinet decided that the new land lease charges will be levied at 1.5 percent of the market value of land per annum with an annual escalation of six percent.
The government has set a divestment target of Rs 51,000 crore for 2023-24 (April-March), of which Rs 4,235 crore has been raised so far.