Cochin Shipyard (file photo)The Cochin Shipyard, an industrial landmark of Kerala, is going through a tumultuous period as the debate on whether or not to float it has been heating up. While workers unions are against privatisation, many feel that a partial float would only help the firm to be independent and progressive.
According to Prof K. Aravindakshan, who is a financial expert and former principal of Maharajas College, Kochi, this is not the first time that efforts are being made to float the shipyard. A plan for floating the shipyard was taken by former finance minister Pranab Mukherjee when his government was in power in the 14th Lok Sabha. The plan was effectively thwarted through worker resistance.
The NDA government is more enthusiastic about privatising public sector entities than the UPA government and the Shipyard also finds mention in the list of companies whose shares could be sold to private entities.
In the past five years, the shipyard has made a profit of Rs 1500 crores. It has earned a reputation for repairs, construction of new ships and maintenance works. The facility, spread over 170 acres and setup in 1972, has already attracted investments of Rs 10,000 crores. There are about 3000 employees working here.
If shares of the firm are issued, there is the danger that the firm could be sold for a cheap price in case the IPO is not successful. This poses a threat to internal security. That the facility is close to other important and strategic locations makes it strategic and hence must not be given into the hands of private entities.
C.K. George, MD, Financial Services, Geojit BNP Paribas and former chair of the CII, Kerala Chapter, however has a different take on the story. According to him, it would be wrong to say that a float is akin to placing the shipyard in the hands of private entities. The move would see the central government selling a stake in the Shipyard, which would increase the capital of the firm. The central government would retain 75 per cent of the company.
Compared to privatisation, which is placing an asset in the hands of the biggest private bidder, a partial share sale would only enhance the prospects of the company and those who are dependent on it. This would also mean that the shipyard can raise money for which it would not have to depend on the central government.
About 75 public sector firms are listed in the stock exchanges and the government holds an average of 72 per cent in these firms. The share prices of the firms indicate that in the past 20 years, the central government could have realised a value addition of 760 per cent in total investments in these firms.
Once the shipyard is listed, more transparency would be introduced, which is a good thing. The management and auditors would be open to criticism and scrutiny during AGMs and quarterly results of the firm would indicate the health of the firm or the difficult times it is going through.
Rather than opposing the float, workers need to ensure that they get discounted shares of the firm that they have responsibly built over the years.
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