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The process of diluting the Government’s remaining stake in aluminium major Balco has moved another step forward with the Cabinet Committee on Economic Affairs giving its nod on Wednesday.
Meanwhile, the Department of Disinvestment has also initiated the process for selling the remaining stake sale through open auction in Hindustan Zinc. Both Balco and Hindustan Zinc were once Government-owned companies, but are now owned by the Vedanta group companies.
The two together are expected to fetch the Government up to ₹20,000 crore. The Government owns 49 per cent in Balco. Now after CCEA’s approval, the Department of Disinvestment will decide on the modalities for the stake sale. Balco is an unlisted company – its shares are not traded on any stock exchange – making it difficult to assert the valuation immediately. But, going by the reserve and net worth of the company, it is estimated that the Government may get ₹4,000 crore from the stake sale.
A senior Government official told Business Line that an Inter Ministerial Group will guide the process, after which the Empowered Group of Ministers will take a final call on the modalities. “Effort will be to adopt open transparent method in view of SEBI rules for selling residual stake,” he said while adding that e-Auction option could be used. The Government sold 51 per cent in Balco in 2001.
Earlier, there was call option (right to sale but not binding to sale), but it was turned down. Even an Appellate Tribunal rejected the call option. Although the matter has reached Delhi High Court, but no stay has been granted. The Government is free to off load stake through the offer for sale method, say legal experts.
The Department of Disinvestment has invited request for proposal to engage merchant bankers for undertaking valuation and assessment of fair share value of the Hindustan Zinc. The Government intends to sell its entire 29.54 per cent remaining stake in the company, which is likely to fetch ₹16,000 crore.
The merchant bankers will advise the Government on the timing and modalities of the open auction.
It will also help in ensuring best return. The Government is making all efforts to complete the sale process in both the companies by March 31, as it would improve the fiscal situation. It has fixed a target of ₹14,000 crore through remaining stake sale.
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