SCI pledged Rs 1,000 crore to its demerger split, then had to borrow to fund it

On 6 May 2022 the board of Shipping Corporation of India approved a revised demerger scheme that raised the transfer of surplus cash to SCILAL — the non-core entity receiving Shipping House and the Maritime Training Institute — from Rs 450 crore to Rs 1,000 crore, citing FY22 consolidated PAT of Rs 865 crore. Board minutes seen by ET Infra show the ministry had directed SCI in an April 2022 letter to complete the demerger and move the non-core assets 'on immediate basis prior to the completion of Share Purchase Agreement' with a private buyer.

By the 8 August board meeting the plan was unraveling: the additional Rs 550 crore had never been earmarked or kept in escrow, and a cash projection put the expected surplus below Rs 1,000 crore. On 4 November management proposed borrowing about Rs 350 crore from working-capital lenders and converting a USD 31 million short-term loan into a 3–5 year facility. 'This proves that SCI never held any surplus cash of Rs 1,000 crores,' a person briefed on the matter told ET Infra, adding that vendor payments were already being delayed and attracting interest charges.

The revised scheme also stripped out safeguards from the original: the condition that Maharashtra approve the transfer of leasehold land, and the requirement for an Iranian no-objection certificate to move SCI's 49% stake in Irano Hind Shipping. The 6 May meeting agenda was prepared around midnight on 5 May and not circulated to directors in advance as ICSI secretarial standards require — to five newly inducted independent directors attending their first ever board meeting. Bankers said Shipping House and the MTI land had always been the 'comfort factor' for ship-purchase loans.

SCI must borrow about Rs 350 crore to fund the Rs 1,000 crore transfer; vendor payments already delayed; debt costs set to rise

The Rs 1,000 crore figure was 'determined' at a board meeting without the Treasury Department's concurrence and was never earmarked in escrow.

A FY16 land revaluation trapped SCI's cash: Companies Act limits on special dividends blocked the government from simply extracting the surplus, so the demerger transfer route was used instead.

The ministry ordered the asset transfer before the sale closed; if privatisation failed, SCI would pay market rent to operate from its own headquarters.

Protective clauses — state approval for leasehold land, the Iranian NOC — were removed because the ministry said they could delay a smooth demerger.

The agenda reached directors hours before the meeting, bypassing the 7-day circulation standard, with five first-time independent directors voting.

A split meant to make a company sellable can hollow it out: moving cash and headquarters out before the sale closes strips collateral and working capital.

As of 26 December 2022 the revised demerger scheme was headed for a final hearing before the Ministry of Corporate Affairs on 29 December. SCI did not respond to ET Infra's detailed questionnaire. By 31 March 2023 SCI's total debt was projected at Rs 2,593 crore, and lenders worried about the loss of collateral.