The Hindu Business Line : Govt set for face-off with Sterlite on Balco stake sale

Time for settlement
The Government had obtained permission from the Delhi HC for a negotiated settlement with Sterlite and got four weeks' time to reach a settlement.
The Delhi HC had said that if the negotiations remain deadlocked by the first week of September, arbitration proceedings would begin in court.

New Delhi , Aug. 21

In a sudden move, the Government on Monday put to rest possibilities of a negotiated settlement with Sterlite Industries over the sale of residual 49 per cent stake in Balco with the Law Minister, Mr H.R. Bhardwaj, declaring that the issue would ultimately go for arbitration.

Speaking on the issue to presspersons here on Monday, the Law Minister said that the Government is "doing the consultations and ultimately it will go to arbitration."

Sterlite action

Sterlite had already moved the court, seeking arbitration last month. Last Monday, the Government had obtained permission from the Delhi High Court for a negotiated settlement with Sterlite and got four weeks' time to reach a settlement.

The Government had asked for time because Sterlite had already moved the court and sought arbitration. The Delhi High Court last Monday said that if the negotiations remain deadlocked by the first week of September, arbitration proceedings would begin in court.

Stating that there can be legitimate dispute over price, the Minister said that, "We are fighting a litigation. They cannot force us to sell."

A-G's opinion

Citing the Attorney-General's legal opinion Mr Bhardwaj said, "The AG gave his opinion. The value of the share is very high'' (implying that what Sterlite was offering was much lower than what the share could fetch). He also said that arbitrators have been appointed by both sides.

Sterlite purchased 51 per cent of Balco from the Government in 2001 for Rs 551.1 crore. It had the option to buy out the remaining 49 per cent after three years in 2004 March, but the process had been delayed following various considerations within the Government. The Government also did not encash the cheque of Rs 1,098 crore given by Sterlite for the remaining stake in the company based on valuation made by SBI Capital Markets.

The AG in April this year had held that the Government was not bound to sell the residual stake in Balco to Sterlite and instead had several options, including going public. The AG had also stated that certain provisions of the shareholders' agreement were not in line with the Companies Act.

MARUTI DISINVESTMENT

Meanwhile, the Government has decided to exit Maruti Udyog Ltd (MUL) completely although no specific time-frame has yet been finalised, the Minister for Heavy Industries, Mr Santosh Mohan Dev, told presspersons.

Based on current market price of the company's scrip on the stock exchanges, the Government expects to mop up around Rs 2,500 crore by selling its 10.24 per cent stake in the country's largest automobile manufacturer.

"We have offered to the Finance Ministry to sell 10.24 per cent stake in Maruti. Now it is up to them to take the call," Mr Dev said.

Last year, the Government had sold 8 per cent stake in Maruti to public sector banks and financial institutions for more than Rs 1,567 crore following which the Government's holding in the company has come down to 10.27 per cent and it no longer has a director on the board of the company.

It had then announced plans to completely exit the company by 2006.

Maruti stocks, on Monday, closed at Rs 840.50 on the BSE after starting the day at Rs 843.