• PAGE ONE
• INDEX
• HOME

Govt to consult VSNL bidders on cash reserves

Our Bureau

NEW DELHI, May 27

THE Union Government will consult bidders who have evinced interest in picking up a strategic stake in Videsh Sanchar Nigam Ltd (VSNL) on withdrawing its cash reserves of around Rs 4,000 crore before concluding the deal.

``We will see whether it is profitable to take out the reserves before finalising the deal. The prospective bidders will be consulted on taking a decision whether to withdraw the reserves or not,'' senior officials in the Department of Disinvestment (DoD ) told Business Line.

While there is no general policy on withdrawing the cash reserves of public sector undertakings that are lined up for divestment, DoD officials said that this was resorted to in the case of Bharat Aluminium Company Ltd (Balco).

``However, this is not a general policy and will be done on a case-to-case basis,'' the officials stated.

In the case of Balco, the Union Government had withdrawn Rs 244 crore, which was a little more than half the total reserves of the company of Rs 460 crore, to reduce the bloated equity base of the company by 50 per cent as part of a financial restructuri ng exercise carried out in March 2000.

The Union Government is scouting for a buyer to pick up 25 per cent of its stake in VSNL. Domestic majors such as Reliance, the Tatas, the Birlas, BPL, Videocon-Toshiba and Bharti-SingTel combine are in the fray to acquire a strategic stake in VSNL.

The Union Government currently holds 52.97 equity in the company while the remaining shares are held by banks, FIIs and the public. In fact, 30 per cent of VSNL's equity is held by institutional investors in the form of global depository receipts.

While deciding on whether to take out the cash reserves of VSNL or not, the Union Government will have to gauge its impact on the valuation of the company.

DoD is keen to push through the sale of VSNL before April 1, 2002, when the company's monopoly over long-distance telephony will come to an end.

SBI Caps and Credit Suisse First Boston are jointly advising the Government on the strategic sale of VSNL.