How will Shipping Corporation of India be demerged and divested

At its board meeting held on Monday, 20th March 2023, Shipping Corporation of India (SCI) fixed the record date for the demerger of its non-core business into a separate company. The record date for the demerger would be 31st March 2023. For shareholders who are already holders of the stock will not have a problem as long as their name is still in the records of the company as on 31st March 2023. However, for investors intending to buy the stock of Shipping Corporation of India (SCI) for the demerger benefits must buy the shares in the market on T-1 date. In the above case, 30th March 2023 is a trading and banking holiday on account of Ram Navami. Hence, stock must be bought latest by 29th March 2023.

What exactly is these scheme of arrangement for the demerger of Shipping Corporation of India (SCI)? Last year, Shipping Corporation of India (SCI) had filed a request with the Ministry of Corporate Affairs (MCA) for the proposed demerger scheme under which all the non-core businesses of Shipping Corporation of India (SCI) would be transferred into a separate company viz. Shipping Corporation of India Land and Assets Ltd. The final hearing for this scheme of arrangement was set by the MCA on 29th December 2022. MCA issued the final order on 22nd February 2023 approving the demerger of the non-core assets of Shipping Corporation of India (SCI) into a separate company. Post that approval, the company also informed the stock exchange on 10th March 2023.

The effective date for the demerger would be 14th March 2023, while the record date for the demerger of Shipping Corporation of India (SCI) would be 31st March 2023. Under the terms of the demerger, the non-core assets (including land and other assets) will be transferred into a separate company called Shipping Corporation of India Land and Assets Ltd. Existing shareholders of Shipping Corporation of India (SCI) whose names appear on the register as on 31st March 2023. The eligible shareholders of SCI will be allotted 1 share of the new demerged company (SCILAL) for every one share held. That means; if you hold 100 shares of SCI, you get an additional 100 shares of SCILAL allotted against the demerger.

Why has this demerger been undertaken. As part of the divestment process, one of the companies identified for strategic sale was Shipping Corporation of India (SCI). As per the government and DIPAM definition, this was not a core business and did not justify the government being involved in the business. Hence, the government had decided to exit the business in toto. However, it wants to sell only the shipping business as standalone as the government would like to adopt a separate strategy for the sale of non-core assets, especially the ones with development potential. This demerger is likely to make the two companies more focused on their respective businesses making it easy for the government to find interested strategic buyers. Normally, focus on the core is preferred by buyers.

The Shipping Corporation of India (SCI) was established on October 2nd, 1961, by the amalgamation of Eastern Shipping Corporation and Western Shipping Corporation. It started with a very humble liner shipping base of just 19 vessels and has since evolved into the largest Indian shipping Company. Its current fleet includes Bulk carriers, Crude oil tankers, Product tankers, Container vessels, Passenger-cum-Cargo vessels, LPG, and Offshore Supply Vessels. Currently, SCI operates nearly one-third of Indian tonnage. SCI is the only shipping company that operates break-bulk services, international container services, liquid/dry bulk services, offshore services, passenger services etc.

Apart from the above, SCI also manages a large number of vessels on behalf of various government departments and organizations. Over the last 60 years, SCI has immensely contributed to the growth of India’s export / import trade and also to the government in the form of regular dividend pay-outs. It has also saved billions of dollars in foreign exchange for the Indian economy. Some of the major clients of Shipping Corporation of India (SCI) include big names like BHEL, Indian Oil Corporation, Steel Authority of India Ltd (SAIL), Hindustan Petroleum, Ingersoll Rand, Reliance Industries, BPCL, Chennai Petroleum, Mangalore Refineries, Shell, British Petroleum, Koch Group, Vitol, Trafigura, Noble Group, Petronet LNG etc. The demerger is part of the downsizing of government ownership in business.