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The Finance Ministry has said that the Government’s residual stakes in Balco and Hindustan Zinc could be sold either through an auction or an open offer.
The final decision on the mode will be taken by the Cabinet Committee on Economic Affairs.
The Government currently holds a 29.5 per cent stake in Hindustan Zinc and 49 per cent in Balco. Both companies are now owned by Anil Agarwal’s Vedanta group. Agarwal had offered Rs 22,000 crore for the part that Vedanta does not own in these companies.
In the case of an open offer, the promoter offers to buy shares at a certain price; in an auction, shares are sold to the highest bidder.
Sibal in charge In another development, Telecom Minister Kapil Sibal has been nominated to represent the Finance Ministry in matters related to the stake sale in Balco and HZL.
Finance Minister P. Chidambaram has recused himself from the exercise, having provided legal services to Vedanta in the past. These issues were discussed at a meeting called by the Prime Minister to review the divestment programme.
The meeting comes in the backdrop of poor revenue collection from disinvestment of stakes in state-owned companies this financial year.
The Government has been able to mop up only Rs 1,325 crore against the disinvestment target of Rs 40,000 crore. It is expected to earn Rs 14,000 crore by selling its remaining holdings in Balco and HZL.
“Based on the Finance Ministry’s view, a note is to be sent to the Law Ministry, and accordingly, a Cabinet note will be prepared,” said a senior Government official.
The official told Business Line that there is no plan to offer Vedanta a call option for the government’s holdings as that would lead to legal complications.
A call option gives an investor the right to buy shares at a specified price within a specified time. However, purchase of shares is not mandatory.
Balco and Hindustan Zinc were sold to the Vedanta Group way back in 2000-02.
Vedanta had a call option, but it could not be exercised fully due to legal battles and other issues.
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