Saturday, June 25, 2022

Privatization: Govt successfully sells Central Electronics Ltd in second attempt

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  • Govt has approved disinvestment of 100% equity shareholding in Central Electronics Ltd (CEL)
  • Nandal Finance and Leasing Pvt Ltd is the highest bidder with Rs two hundred ten crore sixty thousand for the sale of CEL
  • The process for disinvestment of CEL took 5 years to complete, was commenced on October 27, 2016

New Delhi: The Cabinet Committee on Economic Affairs (CCEA) empowered Alternative Mechanism (AM) comprising Union Ministers Nitin Gadkari, Nirmala Sitharaman and Jitendra Singh on Monday approved the highest price bid of Nandal Finance and Leasing Pvt Ltd for sale of Central Electronics Ltd (CEL). Govt has sold 100% equity shareholding in the CEL, a PSU under the Department of Scientific and Industrial Research (DSIR). "The winning bid of Nandal Finance and Leasing Pvt Ltd is for Rs 210,00,60000/- (Rupees two hundred ten crore sixty thousand only)", Department of Investment and Public Asset Management (DIPAM) said in an official statement.

The process for disinvestment of CEL commenced on October 27, 2016, with the ‘in-principle’ approval of CCEA. In the first iteration, due process was followed for strategic sale of CEL, and the final SPA, along with the 'Request for Proposal' document was shared with the Qualified Institutional Buyers (QIBs) on May 02, 2019, inviting financial bid by June 20, 2019.  However, no financial bids were received.

The process was re-launched on 3rd February 2020 with the issue of the Preliminary Information Memorandum (PIM) and request for Expressions of Interest (EOI). The last date of submission of EOI was extended to 15.7.2020 due to the prevailing covid-19 situation. 

Three EOIs were received by the extended last date of July 15, 2020. All the bidders were shortlisted by the Transaction Advisor (TA). The Alternative Mechanism (AM) on January 07, 2021, approved the revised SPA and the revised RFP and authorized DIPAM to issue the revised RFP and revised SPA to the Transaction Adviser for further action, and issue any clarifications thereon if required. The approved RFP and SPA were shared with the TA for issuing to the short-listed bidders for placing a financial bid, along with the proforma for obtaining Security Clearance.

The shortlisted bidders were given access to the Virtual Data Room (VDR) through which CEL provided comprehensive information to the qualified bidders who were also provided access to inspect the assets and facilities being offered as a part of the transaction. A large number of queries from bidders were responded to. After completion of the due diligence process, the TA issued the approved RFP and SPA along with the Security Clearance format to the short-listed bidders on February 17, 2021, with the last date of submission as 10th March 2021. The final SPA contained detailed terms and conditions and the respective responsibilities to meet the conditions precedent for closing the transaction including the release of Government guarantees prior to closing was agreed upon prior to bid submission.

The Last date of submission of the financial bid was thereafter extended till October 12, 2021, due to disruptions caused by COVID-19 and on the request from bidders. By the last date, two sealed bids were received along with non-financial bid documents and bid security from the two qualified bidders.

After receipt of sealed financial bids and in line with the approved procedure for strategic disinvestment, the ‘Reserve Price’ of Rs 194 crore was fixed based on valuations by the Transaction Advisor (TA) and the Asset Valuer (AV) using respective methodologies as per the established process. Nandal Finance and Leasing Pvt Ltd turned out to be the top bidder with a price bid of Rs 210,00,60,000/- (Rs two hundred ten crore sixty thousand) and JPM Industries Ltd was the second-highest bidder with a price bid of Rs 190,00,00,000/- (Rs one hundred ninety crores) in the final bid.

"The entire disinvestment process has been carried out in a transparent manner, with due regard to confidentiality of the bidders, through multi-layered decision making involving Inter-Ministerial Group (IMG), Core Group of Secretaries on Disinvestment (CDG) and the empowered Alternative Mechanism (AM) at the apex Ministerial level. Transaction Adviser, Legal Adviser, Asset Valuer as professionals in their respective fields, have supported the entire process", the statement added.

The next step will be to issue the Letter of Intent (LoI) and then sign the Share Purchase Agreement following which, the conditions precedent would need to be satisfied by the successful bidder, the company and the Government. It is expected that the transaction will be completed during the current FY 2021-22.

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