Govt. for probe into abnormal rise in CMC shares

NEW DELHI, OCT. 2. The Government today said that there was a need for probing the sharp rise in CMC shares (which doubled to Rs. 300 in a matter of months) coniciding with the process of privatisation of the computer maintenance giant.

``The whole issue (rise in CMC share prices) needs to be looked into,'' the Disinvestment Minister, Mr. Arun Shourie, told PTI.

The Cabinet Committee on Disinvestment (CCD) would meet here on Wednesday to take a decision on price bids received for CMC and Hindustan Teleprinters (HTL), Mr. Shourie said, adding ``We are trying to get more information on CMC share price movements from one or two more sources." CMC shares shot up to Rs. 310 from just Rs. 150 earlier this year as the move for disinvestment of over 50 per cent Government equity to a strategic partner neared culmination.

While Tata Consultancy Services has emerged as the sole bidder for CMC, Hindustan Futuristic and Uniword Telecom have submitted the final price bid for HTL.

Sources said though TCS had quoted Rs. 150 for majority equity in CMC, it is well above the 'upset' price (a kind of reserve price determined by government using a combination of pricing formule) set up by the Depeartment of Disinvestment.

Informed sources said despite an intensified debate on whether or not to accept the bid at this juncture, the CCD is likely to accept the TCS bid to accomplish the first privatisation during the current fiscal on way to meet the ambitious Rs. 12,000 crores disinvestment target set for 2001-02.

If accepted, TCS would have to make an open offer for CMC's floating shares equaling about 17 per cent of the profit making company that has a turnover of over Rs. 250 crores.

Even before the price bids were invited, the Disinvestment Secretary, Mr. Pradeep Baijal, is understood to have written to the market regulator Securities and Exchange Board of India to point to the abnormal rise in CMC prices.

Prevailing high prices of CMC at the time of sale could cause problem for the Government and TCS. While the Government is vulnerable to criticism that it undersold the profitmaking company whose shares were bucking the general downward trend in the information technology sector, TCS would have to pay more through the open offer, a must under SEBI regulations.

Only after TCS's open offer Government will be able to transfer its share to the consultancy arm of the Tata group.

The Government will also offer 6.37 per cent share to CMC staffers under the employees stock option scheme but transfer of the same would be effected only after privatisation of the PSE.

In the case of HTL, a 100 per cent Government enterprise, successful bidder would be given 74 per cent stake with the management control.

- PTI

Send this article to Friends by E-Mail

Section  : Business
Previous : GCL in pact with enmail.com
Next     : Split businesses for overseas listing - Nasdaq VP