India raises $540M from VSNL, IBP sale


The Tata Group is buying 25 percent of telco VSNL for about $300 million

By CNN's Shishir Joshi

MUMBAI, India (CNN) -- India will raise about $540 million from selling stakes in petroleum marketing company IBP and telecom giant Videsh Sanchar Nigam Limited (VSNL).

The respective buyers, named Tuesday, are the state-owned Indian Oil Corporation (IOC) and the diversified Tata Group. They will also take management control of the two state entities.

IOC will pay 11.53 billion rupees ($240 million) for a 33.58 percent stake in IBP, while Tata will pay just under 14.4 billion rupees ($300 million) for 25 percent of VSNL.

The government also said Tuesday it had sold a stake in four hotel properties of the Indian Tourism Development Corporation.

Boost to selloff plan

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The divestments give a boost to the federal government's big-ticket privatization plan, which began with the sale of the aluminium company Balco last year.

So far, India has managed to raise a little over $650 million from its equity selloff since last March.

India's Disinvestment Minister, Arun Shourie, said IOC was chosen over Royal Dutch/ Shell for IBP, while the Tata Group outbid Reliance Industries for the VSNL stake.

Tata's bid for VSNL was through its company Panatone Finvest.

Reliance's bid, made through its vehicle Kritika Commercial Pvt Ltd, was 13,466 billion rupees, or about $280 million.

"We hold 53 per cent in VSNL of which 25 percent has been divested to the Tata group," Shourie said. In IBP, the government owns 59.58 percent, he said.

'Meaningful' for Tata

Tata group chairman Ratan Tata described the VSNL acquisition as "meaningful for the group in providing end-to-end quality services" and said it would "facilitate the enhancement of the spectrum of our telecom services."

VSNL has a monopoly over international long distance communication till March 31, 2002.

IOC's M. A. Pathan said the IBP acquisition would help IOC "consolidate its marketing network by virtue of getting retail outlets having an effective market share of 8.4 percent," he said.

IBP has about 1500 petrol stations across India.

The Cabinet Committee on Divestment also announced it would sell stakes in oil majors Hindustan Petroluem (HPCL) and Bharat Petroluem (BPCL) within three months of dismantling the petroleum pricing mechanism, scheduled for April 1 this year.

Divestment Secretary Pradip Baijal did not reveal the size of the stakes the government will sell in HPCL and PBCL, which figure among the top ten profit-making public sector units in the country.

Tuesday's announcements on IBP, VSNL and other potential sell-offs triggered a rally on Indian markets, with share prices of most public sector units rallying.