Shipping Corporation - Adani Seen in Forefront to Acquire

Strategic stake sale in Public Sector Enterprises (PSEs) by Govt. of India is now likely to gather momentum, with H1 of FY 22 seen almost over, while the catch up has to happen in H2 of FY 22. Strategic stake sale of  Govt's entire shareholding in SCI, being 63.75%, along with the handing over of its management control, was already initiated on 22nd Dec, 2020, with Consultant also having been appointed recently, with work on the de-merger is seen progressing well.

Shipping Corporation of India (SCI) is the largest Indian shipping company, with owned fleet, which includes Bulk carriers, Crude oil tankers, Product tankers Container vessels, LPG / Ammonia carriers, Offshore Supply Vessels. As part of the strategic disinvestment process, SCI has analysed the business and determined the Core Assets and Non-core Assets of the company. Non-core Assets of the company, the value of which is not getting reflected in the value of business of SCI, is separated from SCI and moved in an independent entity, for unlocking the value of such Non-core Assets. Same process was followed in VSNL, in the year 2002, when strategic sale was happened by UPA Govt then.

The consideration for proposed De-merger will be discharged by issue of equity shares by resulting company to shareholders of SCI, in ratio of 1 Equity Share of Rs. 10 each at par, in the Resulting Company, for every 1 share held in SCI.  Informed circles are expecting value of these Non Core assets at over Rs. 4,000 crore, being building, freehold land and long leasehold rights in immoveable properties. This works out to net present value per share of Rs.85. Paid up Equity of SCI is at Rs. 466 cr, (FV Rs.10), with present Net worth of Rs.8,350 cr, with BV per share at Rs. 179, as at 30-6-21.

Adani Group, being Numero Uno in Port Ownership, is seen ahead in the race to acquire the company, while insiders expect a bid of over  Rs. 200 per share, with open offer to be made at the same rate, for Core Assets only.  With Float of 36%, open offer for 26% stake, has chances of acceptance ratio at close to 100%, as many shareholders do not tender in open offer. Even Sector is seen passing through best of its phase now, with Baltic Freight Index at its highest, in last 13 yaers, with Bulk Cargo tariff having risen by 6x to 8x in the last 6-9 months. .

With BV of Rs. 179, with huge accretion seen in valuation of SCI Fleets, bid of Rs. 200 is seen realistic.

With Adani Group coming in as new Promoter, will vastly re-rate the stock as well.

Expect process to start monetization from this December.

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