Visakhapatnam: Objections are being raised over the undervaluation of the profit-making Visakhapatnam Steel Plant (VSP) by the merchant bankers.
VSP will go under hammer for offloading 10 per cent of its stakes soon. Trade unions are of the opinion that while the steel plant run by RINL having all the modern, best equipment and land bank of 22,266 acres with actual value running into tens of thousands of crores, it was valued at Rs 4,890 crore.
RINL is in the advance stage of completing its expansion of its production capacity from 3.2 million tonnes to 6.3 million tonnes at a cost of Rs 12,500 crore.
The RINL IPO was supposed to begin the previous government’s Rs 30,000 crore divestment programme for the current fiscal.
By diluting its 10 per cent stake in RINL, the previous government aimed to rise about Rs 2,500 crore. The Cabinet Committee on Economic Affairs (CCEA) in January last year had approved disinvestment in RINL.
The company has appointed four merchant bankers — UBS Securities, Deutsche Bank, Edelweiss Capital and IDBI Capital — as the book-running lead managers to manage the IPO process.
They submitted draft red herring prospectus to market regulator SEBI on September 22 this year.
“VSP has many advantages than any other steel plant in the country which the merchant bankers didn’t take into consideration while valuing it. They have reduced the equipment and machinery by 80 per cent of its value as depreciation. RINL has land bank of 22,266 acres. With all these VSP is worth around Rs 1 lakh crore but it was valued at Rs 4,890 crore. We suspect some foul play and eventually it leads to further privatization of the Plant at a lower price,” CPM state secretariat member, Ch. Narasinga Rao told reporters on Wednesday.
He added that the expansion plans worth Rs 12,500 crore were also not taken into consideration.