The government is considering the closure or merger of three state-owned trading agencies – State Trading Corporation (STC), MMTC and PEC — as the purpose of their existence has eroded gradually, Commerce and Industry Minister Piyush Goyal said on Tuesday. The news of potential closure spooked investors and shares of STC and MMTC tanked by close to 20 per cent on the BSE on Tuesday, when the Sensex dropped 1.7 per cent.
“Slowly the original purpose of these PSUs has come to an end. They are no longer the canalising agencies. It’s not the business of the government to remain in such businesses. It doesn’t make sense to have such a big infrastructure to carry out gold imports, etc. We have started the discussion … all options (closure and merger) are open,” Goyal told reporters on the sidelines of a CII event. As such, these companies haven’t “covered themselves in glory”, he added.
The government holds 90 per cent stake in STC and 89.93 per cent stake in MMTC. PEC isn’t a listed company.
STC and PEC are under severe financial stress, which has threatened their operational capabilities, said a senior government official. STC reported a net loss of as much as Rs 881 crore in 2018-19, against a net profit of Rs 38 crore in 2017-18. In the June quarter, STC again reported losses – Rs 94 crore against a meagre profit of about `1.5 crore a year ago.
Earlier this year, Syndicate Bank initiated insolvency proceedings against STC for a default of Rs 625.32 crore.
Although MMTC has been recording profits, the government feels such profits can be generated through other means as well and the Centre need not be in such businesses to earn this amount. MMTC posted a net profit of Rs 19.73 crore in the June quarter, against just Rs 9.94 crore a year ago. In 2018-19, its net profit stood at Rs 81.43 crore, compared with Rs 48.84 crore a year ago. PEC’s financial performance wasn’t immediately available. Shares of STC tumbled 19.61 per cent to close at Rs 107.40 on the BSE on Tuesday, while MMTC’s dropped 16.57 per cent to end at Rs 20.65.
STC’s debt-to-equity ratio jumped sharply to 25.56 per cent in FY19 against just 2.22 per cent a year ago. FE