Govt may sell Scooters India stake to pvt sector

The Ministry of Heavy Industries plans to sell a controlling stake in Scooters India Ltd (SIL) to a private auto manufacturer. The latest thinking comes after its attempted revival of SIL in 1996 proved unsuccessful, with the company sliding back into the red within a few years.

Sources in the Ministry of Heavy Industries and Public Enterprises told Business Line that in a recent Board for Reconstruction of Public Sector Enterprises (BRPSE) meeting it had largely been agreed to sell off around a 74 per cent stake in the Lucknow-based firm to a private sector company and form a joint venture. The Ministry is now expected to seek a Cabinet approval for the proposal in a month.“As part of our share, we will provide around 150 acres near the Lucknow airport and equipment. The thinking in the Government is that auto manufacturing is not a core business area like steel - because the response time to competition is usually slow. Besides, large investments have to be made in new technology to remain competitive,” said the source.

“To make the company attractive for private investment, we will have to clean up the old debts of around Rs 100 crore. Any fresh investment will have to be made by the new partner,” added the source.

Since 2006-07, SIL has been amounting losses every year - with the total adding up to Rs 826.62 crore up till the end of 2009-10. In February, it announced that according to its 2008-09 financial record, its net worth has been eroded due to the total accumulated losses and it has thus been referred to the Board for Industrial and Financial Reconstruction (BIFR). Previously, the company had also been referred to the BIFR in 1996, after which it had shown profits for a few consecutive years. SIL had last reported profits of Rs 17.03 crore in 2005-06. “After its revival at around 2000, it made profits for a few years and seemed to be doing well. But, it subsequently slid back to losses by the end of 2008-09,” said the source. Industry sources have indicated that among the various private players looking to expand their two and three wheelers operations, Mahindra & Mahindra is a big contender for buying out the majority SIL stake