CAG Picks A Rs 302-crore Hole In Balco Valuation

New Delhi, September 19: | Updated: Sep 20 2002, 05:30am hrs
The governments selloff blues continues to haunt it as the Comptroller and Auditor General (CAG) is believed to have prepared a sharply critical draft report raising serious doubts over the valuation done for Balco, touted as one of the success stories of privatisation.

In the report on Balco selloff, the CAG is understood to have observed that the global advisor, appointed for the purpose, made questionable assumption for valuation through the method of discounted cash flow (DCF) that could translate in an undervaluation of Rs 302 crore for the total equity in the company.

Ministry Replied In December: Baijal

NEW DELHI, SEPT 19: The disinvestment ministry on Thursday said it had already replied to the issues raised by CAG in its preliminary report on Balco valuation with its secretary Pradeep Baijal justifying the deal on the ground that in such cases buyers decide the price.

When contacted about CAG questioning the assumptions for Balco valuation, he told PTI, CAG had sent in the preliminary report last October and we gave our total reply by December. Somebody has circulated the report now mischievously. After our reply we havent heard from CAG till now.

On the negative comments on valuation, he said, we have explained valuation assumptions. These are subjective judgements. In a competitive market the buyer decides the price, and in the Balco case we had asked for open competitive bids. (PTI)

The report is believed to have been circulated to ministries concerned for comments, and upon receipt of their comments the CAG would prepare a final report that would be presented in Parliament.

Stating that base valuation of Rs 793 crore for 100 per cent equity under DCF methodology was adopted and a reserve price of Rs 514.4 crore was fixed for 51 per cent equity put on the block for strategic partner, the draft report said all the questionable assumptions if taken together had the potential of enhancing the base DCF value by Rs 302 crore. The report, raising serious questions on the valuation process in Balco, comes within days of government receiving over a dozen initial bids for 30 per cent equity along with management control in Nalco.

The sale of 51 per cent equity in Balco to Sterlite Industries had triggered a court battle between the Centre and Chattisgarh. (PTI)