The Modi government may stick to the valuation of Central Electronics Limited (CEL) despite the allegations made by Opposition Congress and CEL employees that the reserve price fixed by the government for CEL's disinvestment is undervalued. The government had put on hold the issuance of the Letter of Intent (LoI) to the successful bidder Nandlal Finance and Leasing on the face of allegations against the deal. While the reserve price fixed by the government for CEL was ₹194 crore, Nandlal quoted ₹210 crore.

The inter-ministerial group on disinvestment that is examining the valuation processes followed by the independent Transaction Adviser (TA) and the Asset Valuer (AV) in the case of CEL has not found any lapses, it is learnt.

"The balance sheet value of CEL's equity is ₹111 crore. If we got ₹210 crore it is almost twice of the book value. When they say there is land worth ₹400 crore with CEL, it is not freehold land. It is a leasehold land, and out of 90 years lease, 46 years have already gone. If you look at the net asset value, it is ₹72 crore. However, asset valuation method is used when you have to liquidate or close a company. Hence we have taken the business value, which was higher in this case, so higher value of ₹194 was fixed. Instead of ₹172 crore of balance sheet value, you fix a reserve price of ₹194 crore and you ended up getting ₹210 crore," Tuhin Kanta Pandey, secretary at the Department of Investment and Public Asset Management (DIPAM), said.

It was in November 2021, the Cabinet Committee on Economic Affairs (CCEA) empowered Alternative Mechanism (AM) comprising Nitin Gadkari, Union Minister of Road Transport and Highways; Nirmala Sitharaman, Union Minister for Finance & Corporate Affairs; and Jitendra Singh, Union Minister of State (Independent charge) Ministry of Science and Technology, approved the highest price bid of Nandal Finance for sale of 100% equity shareholding of central government in CEL.

On the allegation that the winning bidder had no experience in any of the areas of expertise of CEL, the government has made it clear that sectoral experience is not an eligibility criteria for the bidder. "For strategic disinvestment of CEL, open bids were invited based on the criteria of networth as laid down in Preliminary Information Memorandum (PIM)/Expression of Interest (EoI). The field of work of the bidder is not among the relevant criteria. It is a part of the disinvestment policy of the Government to not make sectoral experience a qualification criterion for bidders to expand the universe of bidders and provide them a level playing field," Bhagwat Kishanrao Karad, minister of state, Finance Ministry, said in the Rajya Sabha on February 8.

The government however is yet to take a final view on the other allegation made by the employees and Congress that the two bidders who approached the government for CEL were related. The LoI has been put on hold due to the pending examination of the specific allegation regarding the bidder, the minister had pointed out.

DIPAM secretary also said that the government is examining the bids and no LoI will be issued till a final view is taken. "We have to respect the rights of the bidders also. We cannot unfairly treat anybody. We will go by the process. We are not saying we will move heaven and hell to make it happen. For us, the process is sacrosanct, so is competitive bidding, and if it works fine, if it doesn't, that too is fine," Pandey said.

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