BLC sell-off without splitting likely

Mumbai: State Bank of India Capital Markets has advised the central government to divest its 61 per cent stake in Balmer Lawrie Company (BLC) without splitting the company into nine separate units.

The government's merchant banker for BLC divestment, in its presentation to the disinvestment ministry on 13 February, informed that though BLC functions with different unrelated business units, splitting the company into separate units for divestment purpose might require considerable time, which could fail to attract prospective bidders.

The ministry of petroleum has been working on a proposal to convert each of BLC's business units into separate entities to attract bidders. The ministry believes that BLC's highly-diversified and unrelated business portfolio may not attract bidders.

Sources close to the development say splitting into different units may reduce the company's total net worth. "The turnover of some BLC divisions is too low to convert them into separate units and these units may not attract any bidders. Besides, the bidding process will also be complicated if the company splits into different units."

BLC has business interests in greases, lubricants, speciality chemicals, barrels, liquefied petroleum gas cylinders, freight containers, industrial packaging, travel and tourism and tea exports. Out of these, packaging, cargo chemicals and travel and tourism performed well, while the grease, lubricants and tea business of the company fared poorly.

The sources says the government has already initiated the process of shifting the 61 per cent BLC stake to a newly-floated company called Balmer Lawrie Investment Company and the legal issues related to the share-transfer process may take considerable time. "After getting IBP shareholders' approval for this share transfer, the government will invite bids from strategic investors."