The Telegraph
Friday , May 30 , 2014
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Balco, HZL on top of selloff list

New Delhi, May 29: The Modi government may kick-start its divestment programme with the sale of rump shares in Balco and Hindustan Zinc (HZL).

Finance ministry officials said they had been asked to start the process in June and would be approaching potential valuers to evaluate the fair market price of the rump stakes of unlisted Balco as well as Hindustan Zinc, whose shares are trading at Rs 154.80 apiece.

Disinvestment department officials said they expected to raise more than Rs 20,000 crore from the two sales.

The government holds a 49 per cent stake in Balco and 29.5 per cent in Hindustan Zinc.

Between 2001 and 2003, the NDA government had sold a majority stake in the two erstwhile PSUs to the Vedanta group. Vedanta now holds 64.92 per cent in HZL and 51 per cent in Balco.

The deal had then been challenged in Parliament by the Congress party as well as by the Left parties, with Congress leader Kapil Sibal claiming it could have fetched Rs 3,000 crore or more.

After the Congress-led UPA came to power, the issue of letting Sterlite exercise a call option to buy the remaining stake in the aluminium maker came up and was viewed favourably by the finance ministry. However, then attorney-general Milon K. Banerji in 2006 said such an option was invalid under the then existing Indian law.

In January 2012, Vedanta proposed to acquire the government’s remaining stake in the two firms for about Rs 17,275 crore. The offer reignited the government’s interest in a rump stake sale.

FDI in defence

Global manufacturers of defence equipment such as Boeing, Lockheed Martin and Rolls Royce could set up shop in the country if the government allows 100 per cent FDI in the sector through the approval route.

The department of industrial policy and promotion (DIPP) has initiated a cabinet note for inter-ministerial consultation on the issue.

“The increase in FDI component would depend on several criteria, including technology transfer however, portfolio investors, including FIIs, would be permitted to invest only up to 49 per cent,” a senior DIPP official said.

A foreign company may also be allowed to take over a domestic entity provided it brings in state-of-the art technology.

“The commerce ministry has circulated a cabinet note for inter-ministerial consultation,” sources said. The proposal to raise FDI cap in defence from 26 per cent to 100 per cent is aimed to boost manufacturing activities. Portfolio investors, including FIIs, would be permitted to invest only up to 49 per cent.