The Telegraph
Since 1st March, 1999
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Fresh squabble over Balco shares

New Delhi, June 8: Anil Aggarwal-run Sterlite Industries is locked in a fresh battle with the central government over the price that it should pay for the latter’s 49 per cent stake in Bharat Aluminium Company.

At a recent meeting with a committee of secretaries, Sterlite executives had apparently agreed to the government’s suggestion that it float a public issue of Balco to list the company and discover its market price. The Union government, on its part, said it would sell the Balco shares that it still held at this market price.

However, top officials said Sterlite then went back on the agreement and disputed the minutes of the meeting and finally wrote a letter saying that the government’s stand was unacceptable.

“A battle royal will now be waged by both sides and we may be forced to harden our stand on the issue of selling shares to Sterlite at all,” said a government official.

In a secret communique to the cabinet committee on economic affairs, the committee of secretaries has suggested that Delhi High Court, before which the dispute will come up in August, should be informed of Sterlite’s shifting stand.

In March last year, Sterlite had on its own volition offered a cheque of Rs 1,098 crore for the 49 per cent stake held by the government under a shareholders’ agreement. The pact allowed it to call for the shares on the lapse of a certain period of time.

However, the central government, which had sold a controlling stake in Balco a few years back, had refused the cheque, partly because it felt the offer price was too low and partly because the attorney-general had advised that it was not bound to sell the residual stake to Sterlite under Indian law.

Last October, Sterlite had renewed its offer to pay Rs 78 per Balco share to the government plus interest at the rate of 14 per cent per annum on this price from March 31, 2004.

“Obviously, they want us to agree to this. Such a price is really too low. Just look at the current share price of Rs 258 for Nalco and Rs 540 for Sterlite Industries. We could never accept such an offer even if the attorney-general had not advised us against the deal,” said officials.

The attorney-general had ruled that call options were invalid under the Indian law and said the shares need not be sold at all or could be sold at the market price or by auction to anyone willing to buy it.

“It is imperative and advisable for the government to obtain a fair valuation on a current date to ensure that the best price is secured for the shares, if at all the government decides to divest,” the attorney-general said.

Balco has always been a jinxed deal for the government. When the BJP government sold it off for a mere Rs 550 crore four years back, most Opposition leaders, including many in today’s cabinet, cried foul.

The selloff was made after an income tax valuer assessed Balco’s worth at Rs 1,110 crore. Kapil Sibal, then a Congress MP in the Upper House, had estimated Balco’s valuation at anything between Rs 2,300 crore and Rs 4,500 crore depending on the valuation method adopted.

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