Wheels in motion, initial CONCOR bids are likely to be invited by August 1

The Ministry of Railways is now involved in the divestment of CONCOR and all previous issues have been resolved.

Container Corporation of India (CONCOR) divestments have picked up in recent weeks and the government is expected to invite initial bids for the state-owned carrier by August 1, multiple sources told Moneycontrol.

“CONCOR’s EOI (expressions of intent) have been sought for MoD (Alternative Mechanism) approval. The case of the three ministers has been forwarded and approval will be sought. DIPAM (Department of Investment and Public Asset Management) has given permission. EOIs will be issued immediately subject to approval,” said a senior government official.

The Strategic Divestment MoJ consists of the Minister of Finance, the Minister of Road Transport and Highways and the Minister representing the relevant administrative department to decide on matters related to the terms and conditions of the sale.

The alternative CONCOR mechanism includes the ministers of finance, road transport and highways, as well as railways.

The official added that the Ministry of Railways is now involved in the divestment of CONCOR and all previous issues have been resolved.

“The railway ministry’s concerns have been addressed and the railways is ready to proceed with CONCOR’s EOI, which is likely to be in a month’s time,” the official said.

Another executive close to the ongoing discussions told Moneycontrol that the Railway Ministry’s objections to bringing in a strategic investor in the company have 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 the all-clear,” the CEO said.

The CEO added that CONCOR has seen an increase in interest from private parties for the government’s 30.8% stake in the company following Indian Railways’ consent.

“Over the past month, there has been increased interest in the government’s stake in CONCOR,” the CEO said.

CONCOR is in constant dialogue with 4-5 potential investors for disinvestment and a meeting between the government and stakeholders is planned for the first week of August, sources said.

“Two more parties have shown strong interest in government participation in CONCOR,” said another executive.

Based on the company’s current market capitalization, the 30.8% stake up for sale is valued at around 12,000 billion roubles.

Email inquiries were sent to CONCOR and DIPAM had not received a response by the time of publication. This story will be updated once a response is received.

Earlier, interest from private players had waned due to uncertainty over the railway land lease policy CONCOR would 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 a faster recovery in global trade have made the company a more attractive asset going forward.

CONCOR EXIM volumes rose 2.21 percent to 8,51,261 twenty-foot equivalent units (TEUs) in the March 2023 quarter, compared to 8,32,863 TEUs handled last year. Its EXIM grew by 4.22 percent to 34,06,864 TEUs in FY23 compared to the 32,69,026 TEUs it handled in FY22.

CONCOR currently operates 61 domestic container depots, 26 of which are located on land leased from the Indian Railways. These 26 terminals account for more than half of the company’s annual revenue. CONCOR is expected to pay ground rent of 450-490 billion for 2023-24. a year after it had estimated a cost of Rs 450 billion in 2022-23. for the year.

In November 2019, the Cabinet of Ministers had approved the strategic sale of 30.8 percent shares, as well as the transfer of management control in CONCOR from the government’s 54.80 percent capital. The government will retain 24 percent of the shares, but without veto power.

Last October, DIPAM held a roadshow to gauge investor interest and has appointed L&L Partners as legal counsel for the partial divestment. Deloitte Touche Tohmatsu India has been appointed as transaction advisor and RBSA Valuation Advisors LLP as asset valuer.

In September, the government came up with a new land lease policy after market participants raised concerns about land licensing fees paid to CONCOR.

The Cabinet of Ministers decided that the new land rent will be charged at 1.5% of the market value of the land per year, increasing by six percent per year.

The government has set a disinvestment target of Rs 51,000 crore for 2023-24 (April-March), of which Rs 4,235 crore has been mobilized so far.

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