Mumbai, Oct. 15: Anil Agarwal-owned Vedanta group is making a fresh overture to acquire the government’s residual stakes in Hindustan Zinc Ltd (HZL) and Bharat Aluminium Company (Balco) for a combined sum of $3,482 million, valuing the deal at Rs 21,636.56 crore.
In rupee terms, the combined bid is no different from the $3,379 million it offered in August last year for HZL and $550 million for Balco.
Vedanta Resources Plc, Agarwal’s London-listed flagship company, acquired the stakes in the company in 2002 during a controversial selloff conducted by the NDA government.
At present, Vedanta holds a 64.9 per cent stake in HZL and 51 per cent in Balco.
The combined bid price for the stakes in the two companies has been tweaked taking into account the sharp fall in the value of the rupee against the dollar this year.
Vedanta’s shareholders will meet on October 30 to vote on the new resolution.
The government has a 29.5 per cent stake in HZL and 49 per cent in Balco and has not responded to the overtures made by Agarwal in the past.
In a letter to Vedanta shareholders, Agarwal said: “If the entirety of the government’s interest are acquired, the (Vedanta) group’s interests in HZL and Balco would increase to 94.4 per cent and 100 per cent, respectively, and Vedanta’s economic interests (in the two companies) would increase to 55 per cent and 58.3 per cent, respectively.”
Unlike last year, Vedanta hasn’t given a stand-alone bid for HZL.
The resolution seeks to authorise the group to pay the rupee equivalent of $3,482 million for the 29.5 per cent stake in HZL and the Balco acquisition using the spot exchange rate of Rs 62.1383 per dollar. The bid will be “reduced proportionately if less than the entirety of the Government of India’s interest in HZL is acquired”.
Vedanta said it was moving the resolution to arm itself with the power to negotiate the stake acquisition if the government was ready to sell its interests.
The chances of that happening seem remote at this stage.
The government and Vedanta have been locked in litigation over the latter’s right to exercise call options to acquire the government’s stake in the two companies, subject to the rider that the government can transfer up to 3.5 per cent to HZL employees and 5 per cent to Balco employees.
The government has contested the call options enshrined in the shareholders’ agreement that was drawn up by the NDA government.
The dispute relating to the HZL option has been referred to arbitration, which is in its early stages. The next hearing has been set for November 13.
In the case of the Balco option, the arbitration award went against Vedanta. The majority view was that the call option and its exercise violated Indian law. The Vedanta group has challenged the arbitration award in the Delhi high court. The next hearing is scheduled later this month.
The company has offered to withdraw the litigation if the government accepts its latest bid. Vedanta proposes to fund the transactions using the existing cash resources of the group.