The Central government’s move to appoint an asset valuer to expedite the divestment process of HLL Lifecare Ltd has hit a sticky patch as many bidders are displeased with the payment mechanism mooted by the Department of Investment and Public Asset Management (DIPAM) and agitating trade unions vow to block the entry of any valuation firm into the premises of the company.

An unlisted Schedule-B Miniratna company headquartered in Thiruvananthapuram, HLL has seven state-of-the-art manufacturing facilities, five subsidiary companies and a joint-venture arm. It recorded a total turnover of Rs.1,062 crore and profit after tax of Rs.35 crore in the 2016-17 fiscal year.

The plan to divest 100 per cent government stake in HLL, which manufactures and markets the widest range of contraceptives in the world, has been denounced by the Kerala state government, various political parties and the employees union. But the Central government decided to ignore the uproar and the ministry of health and family welfare last week invited proposals from reputed asset valuers. The last date for asset valuation companies to submit their proposals is March 20.

According to sources, the bidding process to pick an asset valuer is not going as smooth as expected. Many valuation companies are keen on joining the race but are reluctant to accept the remuneration terms put forward by the DIPAM considering the herculean task at hand.

As per the request for proposal prepared by the ministry, the bidder is required to quote a fixed lump sum fee. The selected valuer needs to complete the work, including submission of the valuation report, within a period of 60 days from the date of issue of Letter of Intent. But 90 per cent of the fee for the work will be paid only after the acceptance of the final report by the government. The firm will get the remaining 10 per cent of the fee after the completion of the divestment process.

It is learnt that many bidders are discouraged by these terms. They want the government to amend the payment plan and pitch for a milestone system, which means 50 per cent payment of the fee on issue of letter of intent, 25 per cent on submission of draft report and the remaining 25 per cent on submission and acceptance of the final report. However, the government is unwilling to amend the payment structure.

As the ball starts rolling, the HLL divestment is becoming a who-will-blink-first contest between the central government and the protesting workers. And the unions are sticking to their guns. “We won’t allow any firm to enter our premises to conduct valuation. We have the support of all trade unions. This is a profit-making company. None has the right to sell it off,” Internal Chairman of Save HLL Forum Nandakumar Menon told Pharmabiz.

“We have been protesting against the disinvestment move since last December. But our production is not affected. Our agitation is to save this organisation, not to ruin it,” another member of the Save HLL Forum pointed out.

The unions are standing united under the banner of Save HLL Forum. They have the blessings of Chief Minister Pinarayi Vijayan who has already written to Prime Minister Narendra Modi to express his disappointment over the sell-off plan.

The Union government is banking on ‘strategic sale’ of several state-owned companies and properties to meet its divestment target of Rs 800 billion for fiscal 2019. The NITI Aayog has recommended disinvestment of 100 per cent of the government equity in HLL Lifecare through a two-stage auction process. The present plan is to retain vaccine unit HLL Biotech Limited and HLL Medipark, its two subsidiaries, as special purpose vehicles.

Industry observers point out that even for an asset valuer with considerable experience and track record in this field, HLL valuation is going to be a tall order. It has offices, land and lease plots in various parts of country and significant intangible assets including 30-plus trademarks and more than a dozen technology patents.