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SAIL may be privatised! - Views on News from Equitymaster
 
 
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  • Feb 8, 2000

    SAIL may be privatised!

    According to newspaper reports, the government is likely to consider the privatisation of Steel Authority of India (SAIL). The centre is also taking up the capital restructuring plan for the company.

    SAIL is the world's 10th largest and India's largest steel manufacturer. It operates 4 integrated steel plants and 2 speciality steel plants. The company has been on the brink of bankruptcy for some time now. It is attempting to raise resources by getting rid of its loss making units.

    The privatisation of the company is in the best interests of all the concerned parties except of course the employee base, which in all probability will be pruned dramatically. The government would get rid of a cost centre, thus easing the burden on its insufficient resources. Infact, the cash inflow from the disinvestment would help bridge the gap in the government's finances.

    SAIL on the other hand would benefit from a new management, fresh infusion of funds, better technology and the absence of bureaucratic control. The proposal to privatise the company is likely to meet with stiff opposition from the unions, which would object to the large-scale lay offs resulting from the process. The government needs to show the kind of will it has shown in privatizing Modern Foods, another public sector company.

    Market View:
    The stock is rated as a 'SELL' due the company's low employee productivity and the outdated technology. However, in view of the government initiatives to restructure the company, some analysts are taking a fresh look at the company.

     

     

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