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Reliance bags 26% stake in IPCL

Close on the heels of divestment of Maruti Udyog Limited, the government on Saturday offloaded 26 per cent stake in Indian Petrochemicals Corporation Limited to Reliance for Rs 1490.84 crore.

Divestment Minister Arun Shourie said the Cabinet Committee on Divestment had also decided to invite bids for offloading 51 per cent stake in National Fertilisers Limited by June 30.

Shourie said that Reliance was chosen as a strategic partner for IPCL as it bid the highest amongst the three bidders.

Reliance bid Rs 1490.84 crore against the reserve price of Rs 845.5 crore, while both the state-run Indian Oil Corporation and detergent major Nirma bid below the reserve price at Rs 826 crore and Rs 711 crore respectively.

Reliance bid Rs 231 per share against the reserve price of Rs 131 per share. IOC's bid was pegged at Rs 128 per share and that of Nirma was Rs 110 per share.

Having clinched 26 per cent, Reliance would now have to make an open offer for additional 20 per cent stake in the petrochemical major at the bid price.

The Cabinet also approved a minor proposal to allow IPCL to exit from a joint venture company with GE Plastics called GE Plastics India Limited by selling its 50 per cent share for a consideration of Rs 49.03 crore of which Rs 23.63 crore is by way of sale of equity.

The government, which presently has 59.95 per cent equity in IPCL, had decided to offload 51 per cent stake in two phases.

Shourie did not indicate when the next phase would be carried out to offload the remaining 25 per cent stake, for which Reliance would have the first right of refusal.

The acquisition of 26 per cent stake by Reliance would also give the company management control over IPCL.

Shourie allayed fears that Reliance's successful bid would lead to a monopolistic situation saying the government had enough ways of countering it.

"Question of monopoly has been considered earlier and the decision of the government has been that market dominance is not a crucial criterion but abuse of market dominance is, and this can be dealt by competition policy," Shourie said.

Also, the company manufactured 15 products and the market share in different products varied, he said.

"It could be 10 per cent in a particular product and 80 per cent in another."

Besides, the petrochemical products were under Open General Licence and hence it could be imported freely considering that the import duty had been brought down from 150 per cent to 30 per cent, he said.

Finance Minister Yashwant Sinha has already announced that customs duty would be brought down further to 10 and 20 per cent in the next two years, he said, adding that 100 per cent foreign direct investment was allowed in the sector to enable other players to come into it.

Asked when the government would sign the agreement for IPCL sale with Reliance, Shourie said, "Normally we give 15 days time and this can be extended if they have any problem [in mobilising the resources]."

Shourie said the process for open offer would start next week.

Meanwhile, Reliance welcomed the decision saying, "We are delighted to have emerged as the highest bidder for acquiring IPCL through a fair and transparent process of global competitive bidding."

IOC, which had outbid Reliance for petro-retailer IBP, however, maintained that losing out on IPCL would not affect their foray into petrochemical business as they were negotiating for taking over ailing Haldia Petrochemicals and constructing Rs 4,200 crore petrochemical complex at Panipat.

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