New Delhi, May 11: The core group of secretaries is expected to meet tomorrow to decide whether to offer the government?s rump holding in Bharat Aluminium Company to Sterlite Industries or to sell it to the public at large.
The finance ministry favours a sale, while other ministries involved in the decision making process want to sell the shares to the public or even keep it locked up in the government?s reserves.
Sterlite had, in a surprise move some time back, sent a cheque for Rs 1,098.89 crore to the government, asking it to hand over the rump 49 per cent stake in Bharat Aluminium Company to it.
The government has sought legal counsel and it was pointed out that the shareholders agreement, in which the government promised to sell the rump 49 per cent stake to Sterlite, had no legal bindings under the Companies Act.
As a result, several ministries have, in their pre-meeting notes, pointed out that under these circumstances, it would be better to go in for a public issue instead of a negotiated sale at prices which may be on the lower side.
A meeting of the core group on disinvestment held earlier this year had asked the law ministry to certify that the option being sought by Sterlite to buy up Balco shares was still valid as 24 months had lapsed since the cut off date.
SBI Caps had done a contentious valuation of Balco?s rump shares at Rs 101.65 a share with the help of Dalal Mott MacDonald. However, this price was considered too low by many within the core group and questions were raised on Dalal Mott MacDonald having worked on behalf of ABN Amro for a funding project for Sterlite?s Korba operations.
Minister of mines Sis Ram Ola has also received references which claimed the valuation was too low, especially as Sterlite Industries was quoting on the stock exchanges at Rs 1,400 a share recently. These references contend that the Balco stock should not cost less than Rs 1,000 a share. With aluminium futures ruling at an all-time high, Balco shares are expected to actually appreciate.
The problem for the Congress-led government is that Left leaders have already turned it into a cause celebre and have opposed the sale. With secretaries too divided over the issue, the selloff plans may well go into cold storage.
Earlier too, the government had been divided over the rump share sale after senior government officials pointed out that Sterlite?s management structure has changed since it bought Balco from the BJP government four years back.
Sterlite sold its majority holding in London-based Vedanta two years ago. However, the government ultimately accepted Sterlite's contention that there has been no real change in ownership as Vedanta too is owned by the Aggarwal family, which owns Sterlite.
Balco has always proved 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 called foul.
That sell off was on the basis of an income tax valuer's valuation of Balco's assets to be worth Rs 1,100 crore. Kapil Sibal, then a Congress MP in the upper house had calculated the value to be anything between Rs 2,300 crore to Rs 4,500 crore depending on the valuation method taken.
