NBCC likely to buy four smaller PSUs: Report

NBCC CMD Dr. Anoop Kumar Mittal

STATE-run construction and real estate major NBCC Ltd is likely to buy four smaller PSUs engaged in similar activities. This could be the first of many mergers and acquisitions by PSUs in 2017-18 after Finance Minister Arun Jaitley in his Union Budget 2017-18 spelled out a policy at consolidation to mop up revenues from disinvestment.
The four smaller PSUs are Hindustan Prefab, Engineering Projects India Ltd, NPCC Ltd, and HSCC. The Centre owns a 75 per cent stake in NBCC and a 100 per cent stake in others.
The finance ministry’s department of investment and public asset management (DIPAM) has advertised for legal and financial advisors to help in what it calls ‘strategic disinvestment through merger with similarly-placed PSU of the four unlisted companies. DIPAM had earlier...
planned strategic sales of 100 per cent of these companies separately from each other.
NBCC, a Navratna PSU with a market capitalization of Rs 16,980 crore, is one of the few PSUs engaged in the business of project management consultancy services for civil construction projects (PMC), civil infrastructure for power sector and real estate development. NBCC has been executing many landmark projects as a PMC which contributes to about 85 percent of its annual revenue. The real estate segment of the PSU which came into being in 1988, mainly executing commercial real estate projects has undergone a sea change operation wise. NBCC ventured into overseas operations in 1977, executing projects of diverse nature in countries like Libya, Iraq, Yemen, Nepal, Maldives, Mauritius, Turkey, Botswana. Presently, the PSU has its presence in Maldives, Turkey and Botswana implementing various projects and earning consistent revenue.
While officially it is up to the advisors to come up with a prospective buyer among large PSUs, senior government sources say that NBCC is the one likely to buy the four companies as there is ‘synergy’.
Hindustan Prefab builds primarily prefabricated components for railway projects, Engineering Projects does turnkey projects. NPCC is involved in irrigation and hydel projects, while HSCC is concerned with health care infrastructure.
In his Union Budget speech on February 1, Jaitley said that the government saw “opportunities to strengthen” PSUs through consolidation, mergers and acquisitions. He gave the example of the oil and gas sector. “We propose to create an integrated public sector ‘oil major’ which will be able to match the performance of international and domestic private sector oil and gas companies.”
Economic Affairs Secretary Shaktikanta Das had said that the details of the merger among energy PSUs could be announced very soon. However, NBCC’s merger with four PSUs could be the first one off the block.
While technically this would help the government meet its disinvestment target of Rs 72,500 crore in 2017-18, the fact is that such kinds of mergers would lead to listed PSUs paying the government to buy unlisted ones.
Some of the sectors in which the Centre could consider mergers among PSUs could be power, chemicals, diversified manufacturing, mining and steel.