Sterlite to pick up 51% in Balco
Valuation of assets under a cloud
Indian Oil starts Haldia Petro due diligence
Great Eastern tender sought
Ficci wants income tax threshold raised
Pentamedia buys US film company
Aptech to hive off software unit
Mobile firms fight for call parity
Foreign Exchange, Bullion, Stock Indices

New Delhi, Feb. 21: 
The government has decided to sell a controlling 51 per cent stake in Bharat Aluminium Company (Balco) to Sterlite Industries in a deal valued at Rs 551.5 crore.

Sterlite, the smallest player in the aluminium market with a share of only 3 per cent, was picked by the Cabinet committee on disinvestment (CCD) today. The meeting was chaired by Prime Minister Atal Bihari Vajpayee.

Three players � Hindalco, Alcoa and Sterlite � had bid for the Rs 900-crore aluminium company, which enjoys a market share of 15 per cent. The state of Chattisgarh, a wild-card entrant in the race, barged in after bidding closed.

The industry minister of the newly founded state, where Balco is located, had written to disinvestment minister Arun Shourie nine days back offering to buy out the company.

�The bids received officially compared well with the expectations of the government which had a reserve price in its mind as a reference point,� Shourie said here today, adding the state-owned company had been valued in four methods.

�Sterlite�s bid was accompanied by a business plan, which was found to be credible,� the minister told reporters here. The sale agreement is expected to be signed by Monday and the proceeds would flow in before the end of this financial year.

This is the first case this year where a majority stake in a public sector company has been sold to a strategic partner. Last year, the government had sold off its majority shareholding in Modern Food Industries to Hindustan Lever.

Merchant banker Jardine Fleming advised the government on the deal, drawing up a shareholders� agreement which includes a one-year moratorium on retrenchment of workers, except under statutory orders, and a mandatory three-year lock-in period for the sale of the strategic partner�s shares.

Shourie said the sale was finalised after consultations with trade union leaders who are convinced their interests have been taken into account.

The minister said once the pact is signed and the money received, all documents pertaining to the sale will be turned over to the Comptroller and Auditor General for scrutiny.

The process of selling Balco started three years back when the Disinvestment Commission recommended that a 40 per cent stake in the company be sold to a strategic partner. Later, this was amended to a recommendation for a 51 per cent selloff.

However, before this could be done, Rs 244.43 crore was sucked out of Balco in a transaction where the aluminium major bought back half its equity stake from the government. This was done on the penultimate day of March 31, 2000.

The Rs 900-crore Balco had a tidy savings nest egg of Rs 437 crore, almost as large as its equity base of Rs 488 crore. The reserves shrank to Rs 193 crore, and debt-equity ratio shot up from the pre-buyback 4:96 to 11:89 after the deal.

Agarwals do it again

For Anil Agarwal, the promoter of the Rs 2,265-crore Sterlite Industries, the dream to turn into a non-ferrous metal giant has come true. Balco�s acquisition will take Sterlite�s turnover to Rs 1,600 crore. Agarwal, who lives in London now, had lost a battle to wrest Indian Aluminium from global major Alcan a few years ago.

They were humbled again when Alcan sold its entire holding in Indal to Aditya Birla group firm Hindalco.

Sterilte�s triumph in taking over Balco will taste sweeter for the Agarwals given the fact that they were racing against rival Hindalco and global aluminium major Alcoa.

Despite its disappointment with Indal, the company lapped up the Calcutta-based India Foils (IFL) when Hindalco suddenly turned tail in its plan to buy out the firm from the Khaitans. The A V Birla group company cited �hidden liabilities� in IFL�s balance sheet for its last-minute retraction.


New Delhi, Feb. 21: 
The issue of valuation of Balco assets can snowball into a major controversy.

Even as the Cabinet committee on disinvestment met to finalise the sale of the aluminium major to Sterlite Industries, there has been a storm of allegations over the way the profit-making public sector company has been �undervalued�.

Usually top consultancy firms�such as SBI Caps, Industrial Development Bank of India (IDBI), Tata Consultancy, Kotak Mahindra� are selected after a separate bidding to value a company before divestment.

These firms, that have specialists in corporate valuation, send teams that normally take several months to put a value to the physical assets as well as brand value of a company and its products.

But in Balco�s case, a P.V. Rao, an income tax department approved valuer operating out of an office-cum-residence in Delhi, was asked to do the job by the global advisors to the sale. Rao allegedly completed the task in just 10 days.

Dipankar Mukherjee, a member of Parliament and chairman of the standing committee on subordinate legislation who has written to disinvestment minister Arun Shourie pointing out the questionable manner in which the valuation of asset has been done, said �This is trivialisation of something which is a national asset. They seem to be rushing through the motions of a valuation just to get the sale through before the financial year ends.�

Balco employees union sources claimed that the value of the aluminium company would be around Rs 3000-3,500 crore, while the government is selling a 51 per cent stake in Balco for just Rs 551.5 crore. This implies that the government is setting the value at just over Rs 1,100 crore.

The government needs to �allay apprehensions of a tutored valuation with a pre-determined objective of undervaluing the asset to suit some chosen bidder,� he added.

However, Shourie today said the valuation was done by four different types of valuation methods.

Rao reportedly visited Balco�s main unit at Korba between January 31 and February 4 for just five days and its Asansol unit for just two days (February 5-6). A valuation report has since been prepared on the basis of these hurried visits, Mukherjee said.

Opposition parties � both from the Left and the Congress as well ruling coalition members such as Trinamool � are expected to raise this issue during the ongoing budget session of Parliament.


Calcutta, Feb. 21: 
Indian Oil Corporation has started a due diligence exercise at Haldia Petrochemicals (HPL), a process which will have to be completed by March 4 when its board meets to take a final decision on investing in the project.

A company team is holding discussions with the HPL management, putting paid to the recent speculation that the state-owned oil major had not made up its mind on Haldia. �The due diligence has started and is expected to be completed soon. It is being done to value the naphtha cracker unit,� a senior official of the state industry department said.

HPL managing director Richard B. Saldanha was not available for comment, and a spokesperson said he was not aware of any such move. �We have heard something will happen next week.�

Sources said there are three options on the table. The first is to invite IOC to run the naphtha cracker, which will be spun off into a new company with a 49 per cent stake for the oil company and 51 per cent for HPL. This is being touted as the best method because it will enable Haldia Petrochem to slough off a substantial portion of its Rs 4,200-crore debt.

The second is to enter into a processing deal with Indian Oil for the naphtha cracker plant as part of a larger revenue-sharing arrangement. The third option is to sell HPL products through IOC retail outlets under a marketing tieup.

�IOC will consider all options and pick the one that best suits its interests. The board will meet on March 4 to examine the issue,� sources said. The oil major�s participation will come as a financial breather to HPL, which will try to pay back bridge loans worth Rs 962 crore taken from IDBI to tide over its cash problems.

The three options came up after a five-member working group comprising representatives from three promoters � West Bengal Industrial Development Corporation, The Chatterjee Group, and the Tatas � IDBI and Indian Oil met thrice to see how the Fortune 500 firm can be roped in.

Meanwhile, an HPL spokesperson said its products were being well received. �Our products have already grabbed 50 per cent of the market in the north east,� a senior official said.


Calcutta, Feb. 21: 
Subrata Mukherjee, who was today elected the president of Intuc-affiliated Great Eastern Hotel Staff and Workers Association, has demanded that the West Bengal government should float a fresh global tender for Great Eastern. He further added that they will oppose the government�s move to hand over the hotel to the French firm Accor Asia Pacific. �Neither the government nor Accor has discussed the privatisation issue with the employees,� Mukherjee said.


Calcutta, Feb. 21: 
Ficci president Chirayu R. Amin has urged the finance minister to raise the threshold for imposition of the highest personal income tax rate from Rs 1.5 lakh.

Calling the present threshold too low and citing the example of China where only incomes of Rs 30 lakh and above are taxed at the highest rate, Amin said the lowest and middle income brackets should be increased from their current levels.

The budget, he said, need not be harsh to raise funds for rebuilding quake-ravaged Gujarat. Estimates say Rs 25,000 crore will be needed over two to three years. The money could come from national and international funding sources, including companies which have already committed large sums.

World Bank, bilateral government agencies, housing banks, private sector funding agencies and financial institutions will also chip in with assistance. Amin said Bill Gates Foundation and Pepsi have promised $ 1 million each, while Ficci-Care has set up a kitty of Rs 70 crore for the purpose.


Mumbai, Feb. 21: 
Entertainment graphics major Pentamedia Graphics today announced the acquisition of US film production company Improvision Corp, in an all stock deal worth $ 19.80 million.

In a communication sent to the stock exchanges today, Pentamedia said the acquisition of a 100 per cent equity stake in Improvision Corporation, California, USA, will be through a stock swap, for which it will issue 3.30 million Global Depository Receipts (GDRs) at the rate of $ 6 per underlying equity share, for a total consideration of $ 19.80 million.

Bank of America was advisor to the acquisition.

The Improvision deal follows acquisitions of Animasia International, Singapore, Film Roman Inc, US, Media Dreams, Mayajaal and Kris Improvision Corporation, incorporated in 1997 as California Corporation, is a movie production company and has one animated feature film Sinbad: Beyond the Veil of Mists to its credit, released in the US in January 2000. It has also acquired rights to produce another animated film, The sequel: Sinbad and two action films Access Denied and Sherlock and Jack.


Mumbai, Feb. 21: 
In a major restructuring move aimed at making it a focused software education and training company, Aptech Ltd is hiving off its software business to Hexaware Technologies, a group firm.

A communication issued by Aptech to the stock exchanges today said the board will meet on February 27 to consider the proposal of �re-structuring/demerger of the business(es) of the company and merger/amalgamation of the software business with Hexaware Technologies Ltd.�

Aptech added that the restructuring intends to develop two separate entities, with one engaged in training and another in software.

�The board will consider the issues arising as a result of the proposed business restructuring and other related matters,� the notice added. The board will discuss the issue in addition to considering the audited financial results of the company for the year ended December 31, 2000 and recommendation of dividend.


New Delhi, Feb. 21: 
The department of telecommunications (DoT) has locked horns with private cellular operators, who want their subscribers to talk up to 200 kilometres at the price of a local call � a facility Bharat Sanchar Nigam Limited (BSNL) extended last month in its fixed-line service.

The Telecom Dispute Settlement Appellate Tribunal (TDSAT) today restrained the Telecom Regulatory Authority of India (Trai) from taking action against DoT, which has not allowed private service providers to offer the facility.

The regulator, acting on a plea filed by private mobile and fixed-line firms, asked DoT to extend the 200-km local call facility to all service providers irrespective of their ownership. It warned of action if the order was not implemented.

Calls made to a destination 200 kms away were charged STD rates earlier, but a DoT order last month turned them into local calls. This connected subscribers who did not have an STD facility on their phones to places within 200 kms at local tariffs.

However, the facility is available only in respect of intra-circle calls made by Bharat Sanchar subscribers.

Krit Rawal, additional solicitor general, asked for a stay on the Trai order, but his request was shot down by the chairman. The three-member panel, headed by chairman S.C.Sen, restrained the telecom regulator from taking coercive action against DoT. It will hear the case again on Thursday.

�Given the existing number of private telecom operators and subscribers, we stand to lose more than Rs 200 crore if the facility is extended to them,� sources in BSNL said.

Another case which came up for hearing today was the issue of limited mobility. The tribunal, which fixed March 20-21 as the next date for hearing, could not take up the issue today because cellular firms did not send in their replies to a response filed by the Association of Basic Operators (ABTO) and DoT.

The government and the ABTO had been directed to send their opinions by February 9, and the Cellular Operators Association of India (COAI) was asked to respond to it by February 16. The case will be heard next on February 21.

Spatially challenged

Tribunal chairman S. C. Sen today rapped the additional solicitor general Krit Rawal for the government�s failure to provide it with a proper office and facilities to function.

�It is more than six months since the tribunal was set up. Recently, we were given some space in a hotel. We have rooms and it will take some time to turn them into an office.�

He suggested that the tribunal could move to Vigyan Bhawan, where similar tribunals were housed. �If the government does pick Vigyan Bhawan, it should bear the cost.�

Rawal said the law ministry is seized of the issue and is expected to find a proper place where the tribunal can be located.



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