CALCUTTA, India, Feb. 5 (UPI) -- The Indian government on Tuesday sold its stake in petroleum marketing giant IBP Ltd., and telecom giant Videsh Sanchar Nigam Ltd., to Indian Oil Corporation and the Tata Group, respectively.
Tuesday's announcement was the biggest divestment since the Indian government embarked on the ambitious process of selling its stake in state-owned corporations about a decade ago.
IBP, a petroleum-marketing company, owns the largest network of 1,552 petroleum retail outlets in India; VSNL is India's largest international long-distance and Internet Service Provider.
VSNL, listed on both the local and New York Stock Exchanges, had $1.6 billion revenues in 2001 and a 3,000-strong workforce. It holds the monopoly on long-distance services until April, when the government's telecom policy will see new players in the field.
IOC, which bought IBP, is also state owned. It is India's largest commercial enterprise and its March 2001 revenues were $24.29 billion. It is also the only Indian company to find a place in Fortune magazine's "Global 500" of the world's largest companies; it ranked 209 in 2000. Among petroleum-refining companies, it has a global rank of 18 in terms of revenue.
IOC agreed to buy the state's 33.58 percent stake in IBP for Rs 1,153.68 ($24) per share, a 80 percent premium over the current value.
"Being a company that is getting aggressive in petroleum distribution, by acquiring IBP, we have strengthened our retail distribution network significantly," said A.M. Pathan, IOC chairman.
The Tata Group is one of the country's largest private-sector industrial groups. It owns 80 companies in seven sectors, including the largest private-sector companies in chemicals, energy, automotive, telecom and Information Technology, services and consumer-goods sectors.
The group is also actively involved in the developing the Indian telecom sector. It offers basic telephony services in the southern state of Andhra Pradesh, and has secured licenses for four more states. Recently, it became a major player in mobile telephony through its investment in a consortium with AT&T.
The Tatas grabbed VSNL after bidding Rs 202 ($8.35) per share against the company's prevailing market price of around Rs 170 ($7.00) on the Bombay Stock Exchange.
"We are pleased to have been successful in our bid for VSNL, which will facilitate the enhancement of the spectrum of our telecom services," said Ratan Tata, group chairman. "This meaningful acquisition will enable us to meet our objective faster and help in providing end-to-end quality services to our customers."
For the Indian government, which began the until-now lackluster privatization drive in 1991, Tuesday's announcements could well be considered a moment of reckoning. Each year in its budget since 1991, it has fixed certain targets for disinvestments and has identified companies for the purpose. Seldom did it manage to achieve those targets.
In the past 10 years, India had planned to mobilize Rs 420 billion ($ 9 billion) of cash through divestments, but achieved less than half that figure -- Rs 208 billion ($4.4 billion).
With Tuesday's deals, the government has raised close to $1.46 billion in this financial year; its target was $2.5 billion.
The $1.46 billion includes the $830 million dividend the government withdrew from VSNL from the three dividend payouts this year, and a few other divestments during the year.
International experts lauded the government's feat.
"The privatization process has achieved critical mass," said Singapore-based P.K. Basu, South East Asia economist with Credit Suisse First Boston. "If these two lift off, there'll be a significant increase in the pace of the exercise."
"It marks the coming of age for India's privatization drive and, if successful, will be a huge plus for the government's credibility," said AT Kearney Marketing Manager Satyajit Lahiri.
Buoyed by the success, Disinvestment Minister Arun Shourie said the government would put three more state-owned blue chips -- Mahanagar Telephone Nigam Ltd., Hindustan Petroleum Ltd., and, Bharat Petroleum Ltd. -- on the block before the end of this fiscal year.
"Just wait and watch out for what we pull off by the end of March," said Shourie.