The Andhra Pradesh government, which has decided to divest stake in Godavari Fertilisers and Chemicals Limited, has invited bids from interested parties from May 10. The last date for submitting the offers is June 21.

According to principal secretary (public enterprises) Deepak Kumar Panwar, seven firms have already evinced interest in purchasing the state government's shares in the GFCL. These include four foreign companies, including the world's fourth biggest fertiliser company Foskor Limited of South Africa, Groupe Schimike Tunisien from Tunisia, Rotem Amfert Negev Limited and its associate Dead Sea Works Limited from Israel.

The Indian companies, which have come forward to buy out AP government's stake in GFCL, include Coromandal Fertilisers, Kribhco and Zuari Agrochemicals.

The state government initially planned to sell its shares to GFCL co-promoter IFFCO but the latter refused. Subsequently, a proposal was mooted to divest shares of both the promoters together and a study by Fergusson  & Company was commissioned in this regard but IFFCO withdrew from this proposal too at the last moment. Hence, the AP government decided to go ahead with divestment of its shares.

IFFCO and AP government together hold 51 percent equity in GFCL. AP holds 26 per cent equity and IFFCO has 25 per cent and others hold the remaining equity. The bidding for purchase of the government's equity will begin on May 10 and the process is expected to be completed by the end of August 2003.

The bids will be evaluated in two stages and later referred to the Cabinet Sub-Committee on PSU Reforms. A final decision on divestment will be taken by the State Cabinet after going through the sub-committee's recommendations.

The GFCL's paid-up equity stands at Rs 32 crore (Rs 320 million). The value of AP government and IFFCO's equity at 25.88 per cent and 24.99 per cent respectively stands at Rs 8.28 crore (Rs 82.8 million) and Rs 7.97 crore (Rs 79.7 million). The company's net worth was Rs 76.25 crore (Rs 762.5 million). With a workforce of 691, the GFCL had recorded a profit after tax of Rs 1.95 crore (Rs 19.5 million) during 2001-02.

Panwar said the government has decided under compulsion to divest its share since it is not in a position to further invest in the company, which required Rs 900 crore (Rs 9 billion) more in the next seven years to become competitive and to break even. Of the Rs 900 crore, the state government equity component would have been Rs 130 crore (Rs 1.3 billion).

Besides, the company has come under Word Trade Organisation obligations to stay in the market. Consequently, there has been a tough competition in the post-WTO regime and cut in fertiliser subsidies, making it difficult for the company to manage the situation, especially when its net worth has come down rapidly and its profits are dwindling. "The government is forced to divest its equity in the interest of the company and in its own interest," Panwar quipped.

Incidentally, GFCL is one of the 68 pubic sector corporations, cooperatives and joint stock companies, which are covered under the Phase II of the public enterprises reforms proposed by the government over the next four years. The World Bank is extending loan assistance for the Phase II PE reforms programme, which envisages an outlay of Rs 1,450 crore (Rs 14.5 billion).