Mumbai: The disinvestment of Hindustan Newsprint Ltd (HNL) has entered the last round with the Cabinet Committee for Disinvestment (CCD) asking for transaction documents for freezing the first-round procedures. CCD is expected to call for financial bids to sell the government's 74-per cent stake in the newsprint company by the end of April 2003.
Sources close the development, however, say the number of bidders for HNL has been reduced to two from the earlier nine. Recently, the Tamil Nadu Newsprint (TNPL) and West Coast Paper Mills had also decided to opt out of the race for ownership of the public sector company.
Last year, when the government had invited expressions of interest for HNL there were responses from over nine major players, including ITC Bhadrachalam Paper, Ballarpur Industries, Mysore Paper Mills and JK, apart from West Coast and TNPL.
This would now leave only the Gujarat Samachar group of publications and a Singapore-based consortium of some of the world's leading newsprint manufacturers in the race to acquire the government's stake in HNL. SBI Caps is the merchant banker for the selection of the bidders.
"Increasing newsprint prices and the difficulty in modernising manufacturing equipment are forcing the bidders to pull out from the race," the sources say. Newsprint prices are currently reigning at one of their lowest ever levels. Till January 2002, the price was over $550 per tonne, which has now fallen to below $400 per tonne. "Newsprint prices have remained at this level for more than a year, forcing most end-users to import," the sources add.
Newsprint is used mainly in the publication industry. The estimated demand for newsprint has been pegged at over 7 lakh tonnes and the total production available in the country is about 3 lakh tonnes, with the rest imported. Industry players lament that an increase in newsprint imports had forced most serious companies to dump plans of participating in the HNL divestment.
The Kerala-based HNL, a wholly-owned subsidiary of Hindustan Paper Corporation, has a capacity of 100,000 tonnes. It has a dominant market share in the south Indian market. Initial estimates have put the value of the 74-per cent stake in HNL at between Rs 250 crore to Rs 300 crore.
Of the two players left in the race, the Singapore consortium is easily the largest. Led by Tembec of Canada and APP of Singapore, the consortium has a combined newsprint production of about 8 million tonnes.