The Cabinet Committee on Economic Affairs (CCEA) may consider Government’s residual stake sale in Hindustan Zinc and Balco on Monday.
Currently, the Government has 29.54 per cent stake in Sterlite-owned company. Based on the closing price of January 17, the Government can earn over Rs 16,000 crore. This alone is sufficient to meet the budget target of the residual stake sale.
The Government is targeting to get Rs 14,000 crore from this stake sale.
This move is apart from Rs 40,000 crore to be mobilised through selling stakes in the Government-owned companies.
“After Attorney General’s (AG) opinion dated January 8, the Government is ready to sell its remaining stake in Hindustan Zinc through open auction method,” a senior Government official told Business Line .
Call optionHindustan Zinc was once a Central Government Enterprise, but it was strategically divested. The Government sold 26 per cent in 2002-03 and earned Rs 445 crore, while call option was exercised by Sterlite Opportunities and Ventures in 2003-04, when it bought another 18.92 per cent Government stake and paid Rs 323.88 crore.
CCEA is also expected to consider remaining stake sale in Balco along with Hindustan Zinc. Here, too, the Government has got favourable legal opinion. This company was also Government-owned till 2000-01, when the Centre went for strategic sale and divested 51 per cent at Rs 551.50 crore. Remaining 49 per cent is still with the Government.
After legal tussle on call option (a right, but not obligation, to buy shares at specified price and date), the Finance Ministry has favoured open auction route for both the companies. This method invites bids and highest bidder(s) get shares. Sterlite can also bid for shares, but it will have to compete with other investors.
Balco is not a listed company, so it is not easy to estimate the realisation. However, based on the company’s net-worth and reserve, sale of 49 per cent may fetch between Rs 3,500 and Rs 4,000 crore.
Sale of residual stake in Hindustan Zinc and Balco gained momentum after the Prime Minister Manmohan Singh chaired a review meeting on December 3.
Considering the legal tussle on call option and amendment in Acquisition Act besides CBI filing preliminary enquiry (PE) in HZL strategic disinvestment, it was decided to obtain the AG's opinion.
On January 6, the Law Ministry informed the Mines Ministry (nodal one for bringing a proposal before the CCEA) that there appears no constitutional or legal issue in selling stake in Balco.
On January 8, the Ministry communicated AG’s opinion on HZL which said that as the company has ceased to be a Government company for almost a decade, one way could be to sell the shares in the open market, if the prevailing market considered being fair.
shishir.s@thehindu.co.in