The Government will shortly write to Sterlite, a Vedanta Group company, asking it to submit a formal plan to buy the remaining Government stake in Balco. The Government went for a strategic sale of Balco's equity to Sterlite in 2001.
A person familiar with the development told Business Line , “An Empowered Group of Ministers, in its meeting on November 30, discussed various options in response to the Vedanta Group's Chairman, Mr Anil Agarwal's, letter to the Prime Minister on July 4. It was decided to respond by asking for a formal proposal.” Sterlite holds 51 per cent in Balco while the remaining 49 per cent is with the Government.
This move is being initiated at a time when the Government is finding it hard to realise the targeted Rs 40,000 crore from disinvestment of state-owned enterprises.
Although no timeline or further course of action has been finalised for the sale of the residual stake in Balco, once Sterlite gives the proposal, there should not be any problem in selling the stake, the source clarified.
A leading financial consultancy firm made a presentation to the EGoM on disinvestment, giving various price scenarios for selling the remaining stock. The EGoM did take cognisance of those, but instead of accepting any of the scenarios, decided to wait for Sterlite's proposal, the source added. The Government, as part of its disinvestment programme, sold 51 per cent of its equity in Balco for Rs 551.50 crore.
Since Balco is not listed on any stock exchange, it would not be possible to give the valuation and the amount likely to be realised. But the Government can hope for a few thousand crore from the sale of the remaining 49 per cent stake. Since the strategic sale 10 year ago, the company's worth has gone up many times, the source added.
In January 2011, an arbitration panel had allowed the Government to sell its residual 49 per cent stake in Bharat Aluminium Company(Balco) as it deems fit. The panel had struck down Sterlite Industries' call option to acquire the balance 49 per cent stake as invalid. A call option is an agreement that gives the buyer a right to buy some part of an asset at a specified price within a specified time frame. The original deal gave Sterlite a call option to acquire the balance stake within three years.
When Sterlite decided to exercise the call option, differences emerged over valuation of the stake and the dispute went into arbitration.
The issue of the Balco stake sale was discussed along with that of Hindustan Zinc, sources close to the development informed. However, there is not much complexity involved in selling the residual stake of the Government, they said.