The government plans to call for financial bids for the strategic sale of HLL Lifecare next month, after the approval of the Alternative Mechanism (AM) on the share purchase agreement (SPA), a finance ministry official said.

The AM comprises of road transport and highways minister Nitin Gadkari, finance minister Nirmala Sitharaman, and health and family welfare minister Mansukh Mandaviya. The request for proposal (RFP) and SPA will be shared with the transaction adviser to be issued to the short-listed bidders for placing financial bids.

The RFP document describes the evaluation criteria on which the proposal will be assessed and is used to elicit a formal financial bid from potential investors.

Sources indicated that the Piramal group, the Adani group, the Apollo Group of Hospitals and Megha Engineering and Infrastructures Ltd (Meil) are among those who have submitted their expressions of interest.

HLL Lifecare is involved in manufacturing and marketing a range of contraceptives, women’s healthcare products, hospital supplies as well as other pharmaceutical products.

The decision to privatise HLL Lifecare, which played a key role in the procurement and distribution of emergency medical supplies during the pandemic, was opposed by workers.

“Strategic divestment is based on the rationale that wherever competitive industry has come of age, the economic and job-creating potential of the public enterprise and the economy is better realised in the hands of the private sector through the infusion of capital and better management practices while freeing public resources for social sector and infrastructure,” Minister of State of Finance Bhagwat Kishanrao Karad in a written reply in parliament said on the reasons behind the decision.

On the issue of protecting employees under the divestment process, the minister said the terms and conditions in disinvestment include employee-related provisions and after privatisation, the prospects of employees are also expected to improve with the growth in production, productivity and profitability. After the Department of Investment and Public Asset Management (DIPAM) invited preliminary bids for selling 100 per cent of the government’s stake in HLL Lifecare in 2022, the Kerala State Industrial Development Corporation (KSIDC) also applied to participate in the auction.

The bid submitted by the Kerala government as a lead member of a consortium was given due consideration, but its Expression of Interest (EoI) could not qualify since it did not meet the eligibility criteria, the minister informed the Lok Sabha.

Though the government received multiple bids for the privatisation of HLL Lifecare back in March 2022, the process of strategic sale has been pending. “On completion of the transaction as well as the stipulated lock-in period, flexibility would be given to the strategic acquirer for an easy exit from a part of the business which is not in sync with the business plans of the acquirer. The condition of the lock-in period of the entire shareholding in the company, requirements regarding lock-in of equity, continuity of business, staff service conditions, etc. will be clarified at the second stage of the bid process,” DIPAM said in response to queries raised by potential bidders.

The company states it has emerged as a global corporate of international acclaim, taking under its wings seven subsidiaries with 21 offices and 7 manufacturing units spread across locations and having a multitude of products ranging from contraceptives and hospital products to pharmaceuticals; and services from diagnostics to infrastructure development.

As of date, HLL has been accorded ‘captive’ status by the Health Ministry with respect to the procurement of condoms and contraceptives. According to the Memorandum of Understanding (MoU) between the Ministry and the company, 75 per cent of the company’s manufacturing capacity for condoms and 55 per cent of the manufacturing capacity for oral contraceptives is reserved for the fulfilment of government tenders.

DIPAM said the existing contracts will not be impacted by the proposed transaction, which will continue for the remaining period of the contracts. “Going forward, the company may have to go through the regular tender process in competition with other companies,” it said.

The government has set a disinvestment target at Rs 51,000 crore for FY24, lower than the previous financial year, according to the Union Budget for 2023-24 presented in Parliament.