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Biggest problem in a strategic sale is getting the valuation right: Prithvi Haldea, Prime Database

The government is hopefully more serious and will go for divestment in the true sense.

ET Now|
Oct 01, 2019, 10.14 AM IST
Prithvi Haldea-1200
The world at large should believe that the disclosures on the PSUs were complete and number two, the bidding process was very transparent and anybody who qualified for the bidding was able to do it without any problems, says Prithvi Haldea, Founder Chairman, Prime Database. Excerpts from an interview with ETNOW.

Government is on track to privatise PSUs like BPCL, SCI, Concor. Concor is a monopoly business, BPCL is a strategically important business. Do you think this time the government is committed?
I hope that they are more committed this time than ever before. Five years ago, one of the first statements of the government was that the government should not be in the business of business. However, we did not see anything significant happen in the last five years. We did see divestment numbers but most of them came either from selling one PSU to another PSU or buybacks and stuff like that.

In terms of either IPOs or further offer for sale (OFS), we did not have much success. Many of these had to be bought by LIC and the true divestment, which was basically taking shares to the public at large, did not materialise.

Now in its second term, I hope, the NDA government is much more serious and will go for divestment in the true sense, which is if they are non-strategic assets, get rid of them completely. If they are companies which are running into losses, get rid of them completely. If they are some strategic assets, then at least start divesting but do not get into the same mould of selling one PSU to another and realising money, because that would be more a restructuring rather than divestment. The government may still get money out of that but if they are to follow the true spirit of divestment, then they should be looking at private owners acquiring these assets.

I am sure the government has the intent, but how soon do you think they would be able to privatise assets like BPCL? Intention is one, process is the second and process cannot be changed even if the intention is strong?
Yes, one of the biggest problems in doing a strategic sale is whether you got the valuations right. There is nothing called a perfect valuation. Valuation is always in the eyes of the buyer, the seller may have a price or an amount in mind but ultimately the buyer has to seek and justify value to what use he will make of the asset going forward.

Therefore in my view, two things are very important. One is the document which is describing the asset, has to be absolutely transparent and complete so that the buyer can take a holistic view on what is going to buy.

Number two the bidding process has to be very transparent. It should be open. We put many restrictions when we are asking the bidders profile. The only condition that is important is what happens to the employees of the company, once it goes out of government hands.

You can have some kind of conditions put there, but about the rest of it, we should be as relaxed as possible and let the buyer assess the value and through a transparent process, make bids with the highest bidders taking it all.

Now what he does with that asset going forward should not be anybody’s concern. He may actually run into losses subsequently or he may make bumper profits but the government should not be accused of either selling it cheap or expensive. The important thing is that the world at large should believe that the disclosures were complete and number two, the bidding process was very transparent. Anybody who qualified for the bidding was able to do it without any problems.

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