Balco, Hindustan Zinc stake sale on track

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: Sep 3 2013, 02:25am hrs
The Centres plan to sell its residual stake in two metals companies Balco and Hindustan Zinc through auction that would fetch it R20,000 crore ($4 billion) crore is unlikely to face any legal hurdle, according to senior lawyers.

While the cabinet committee on economic affairs is expected to take up the proposal for a change in the regulations governing call and put options, a cabinet note has been already circulated in this regard.

The sale will lead to an immediate flow of foreign capital that the government needs to finance its current account deficit pegged at $70 billion in 2013-14. The government currently holds 29.5% stake in HZL and 49% stake in Balco.

Vedanta Resources, the parent company of Sterlite, last year offered R17,275 crore to buy out the government 's remaining stake in HZL and Balco, but the latter was keen on selling its residual stake through the auction route. This, the government feels, will ensure that apart from Sterlite, other investors would also be able to bid for it.

However, this may act as a dampener to Vedanta's overall corporate restructuring programme as legal experts feel that as of now there is no court verdict in favour of Sterlite.

The government's move to exit the mining companies comes in the wake of attorney general GE Vahanvati suggesting the government can divest its shareholding in the two entities by selling them in the open market, only if the prevailing price is considered fair.

This opinion is in sync with the proposal of the finance ministry that e-auction method should be followed to divest stake in the two companies to realize the fair market value.

Economic affairs secretary Arvind Mayaram told FE that Vedanta group companies can fetch residual stakes if they are offered a higher price than other bidders in the auction.

Welcoming the move, Ajit Yadav, president and group counsel, Vedanta, said: We are yet to see what shape and form it will have. We don't have details right now and have come to know about it only through media. Let's hope the government will put it soon in motion. And we will deal with it accordingly. Yadav added there was no bar on the government to go ahead with its remaining stake sale in the two firms.

The new Companies Bill deals with the free transferability of shares and brings out the mind of the industry about how law needs to be read. And we are hopeful that even the Supreme Court will uphold the Bombay HC order.