Anil Agarwal-promoted Vedanta Resources Plc is likely to bid for the Government’s residual stake in Hindustan Zinc.
The Government has 29.54 per cent stake in the company which is owned by Sterlite Industries, a Vedanta Group company.
On Monday, the Cabinet Committee on Economic Affairs (CCEA) approved the sale.
The Government intends to use open auction method for selling its stake. Under this method, companies, financial institutions and even individuals can bid for the shares on offer and the highest bidder(s) get them. Vedanta will have to compete with others to buy the stake.
A Vedanta official said since it will be an open auction, the group companies may bid for shares.
Last October, Vedanta obtained shareholder’s approval for spending $3,482 million (around Rs 21,600 crore at the exchange value of Rs 62.13 for a dollar) to buy residual stake in Hindustan Zinc and Bharat Aluminium Co Ltd (Balco). This money is to be used for purchasing entire or part of the stake.
The CCEA is yet to take a call on Balco.
The Government is expected to move quickly on finalising the process as it needs money before March 31, 2014, to restrict the fiscal deficit within the budgeted target of 4.8 per cent of GDP.
The Government aims to raise Rs 14,000 crore through sale of residual stakes in entities such as Hindustan Zinc, Balco and Axis Bank. Hindustan Zinc was once a Central Government-enterprise.
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 stake from the Government and paid Rs 323.88 crore.
However, the call option could not be exercised further due to legal problem and the matter went for arbitration.
In an effort to move beyond the disputes, Vedanta offered in January last year to buy the Government stake in Hindustan Zinc for $2.9billion and the stake in Balco for $338 million. As part of the deal, Vedanta agreed to drop all litigation. The Indian Government has yet to accept the offer.
Vedanta had said in its circular to the shareholders that there is no certainty that the Government would accept the offer but it noted that the “company is taking the opportunity to obtain approval from shareholders (to buy the two minority stake) so that, if the Government of India determines to sell its interests, the company can seek to acquire all or part of the GoI’s interests in a timely manner”.
shishir.s@thehindu.co.in