Vedanta Group aluminium refiner Sterlite is expected to shortly make a formal proposal for acquiring the Government's residual stake in aluminium major Balco.
The Government’s letter to Sterlite inviting a formal proposal to this effect is expected to evoke a positive response, sources said. The Government has a 49 per cent stake in Balco, while the balance is already held by Sterlite.
The expectation is emerging at a time when the Government is trying various means tomeet the shortfall in disinvestment target of Rs 40,000 crore. The letter has been set after the Empowered Group of Ministers (EGOM) in its meeting on November 30decided to ask for a formal proposal from Sterlite.
The Government, as part of its disinvestment programme, had earlier sold 51 per cent of its equity in Balco for Rs 551.50 crore. This aluminium company based in Chattisgarh is not a listed company, so, there are no market benchmarks for the expected valuation and the amount likely to be realized.
But the Government may hope for a few thousand crore for the remaining stake. Since the 'strategic' sale 10 years ago, the company’s worth has gone up many times, a senior Government official said.
This move is in response to to the Vedanta Group’s Chairman Mr Anil Agarwal letter to the Prime Minister on July 4. the official added. "Now, the group has to talk about the price it is willing to pay," he said.
In January 2011, an arbitration panel had allowed the Government to sell its residual stake in any, or 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.