The Government of India is considering selling a 5-7 percent stake in the Container Corporation of India (CONCOR) following lukewarm interest in its strategic sale for privatization, according to government sources.
Options such as an offer for sale or qualified institutional placement (QIP) are being considered for the stake sale.
As Per a news report by Money Control, The government has decided to indefinitely put the CONCOR divestment on hold due to a lack of potential buyers. Issues such as CONCOR’s inability to reduce its land leasing fee and insufficient support from the Ministry of Railways have been deterrents, complicating the government’s plan to divest around 30.8 percent of its 54.8 percent stake.
The Cabinet had approved the strategic sale of a 30.8 percent stake in November 2019, along with the transfer of management control. The government would have retained a 24 percent stake without any veto powers.
“If the government wants to proceed, it requires an informal go-ahead for the strategic sale. However, it’s unlikely to happen in this fiscal year,” as per the sources.
The strategic sale has stalled, partly due to issues raised by the Railway Ministry. Despite the new land leasing policy intended to facilitate CONCOR’s strategic sale, progress has been minimal. The involvement of trade unions and a coalition government also impacts such strategic decisions.
Plan B for CONCOR
The government is now exploring the sale of a smaller stake in CONCOR and is in talks with financial institutions. A second official mentioned that CONCOR’s management is working with these institutions to gauge interest in a smaller strategic sale via an offer for sale or QIP route.
The significant rise in CONCOR’s market capitalization, up 200 percent to Rs 62,470.95 crore since November 2019, supports this decision. A 5-7 percent stake sale could be valued at Rs 3,500 crore – Rs 4,700 crore based on current market capitalization.
Land Licensing Fees Overhang
CONCOR is expected to switch its inland terminals to the government’s new land-licence fee regime in 2024-25, which should help reduce its land licensing fees significantly. The third official mentioned that CONCOR is in discussions to switch two inland container depots to the new regime, including part of its largest depot at Tughlakabad in New Delhi. This is expected to cut CONCOR’s annual land licence fee by approximately Rs 120 crore in 2024-25.
In FY24, CONCOR paid Rs 424 crore as land licence fees to the Ministry of Railways. CONCOR currently operates 61 inland container depots, 26 of which are on land leased from Indian Railways and account for over half of its annual revenue.
Last month, Sanjay Swarup, CONCOR’s Chairman and Managing Director, stated that the company aims to increase overall cargo volumes by 18-20 percent in 2024-25 and plans to invest Rs 610 crore in the ongoing financial year.
The DIPAM held roadshows in October 2023 to gauge investor interest and appointed L&L Partners as the legal advisor for the partial divestment. Deloitte Touche Tohmatsu India was appointed as the transaction advisor and RBSA Valuation Advisors LLP as the asset valuer.
In September 2023, the government introduced a new land leasing policy after concerns were raised about CONCOR’s land licensing fees.