The Telegraph
Since 1st March, 1999
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CAG poser on Balco valuation

New Delhi, Sept. 19 (PTI): The government’s disinvestment blues continued to haunt it with the Comptroller and Auditor General (CAG) 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 privatisation of Balco, 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.

The report is believed to have been circulated to ministries concerned for comments, upon receipt of which 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 yet another alumumium PSU Nalco.

The sale of 51 per cent equity in Balco to Sterlite Industries had triggered a court battle between the Centre and the Chattisgarh government that culminated in the Supreme Court upholding the government’s disinvestment for Rs 551.5 crore.

Meanwhile, the disinvestment ministry today said it has already replied to issues raised by CAG and secretary Pradeep Baijal justified the deal on the ground that in such cases buyers decide the price.

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