Thursday, June 1, 2023

Govt may sell Balco stake next fiscal yr

New Delhi: More than two decades since the privatization of Bharat Aluminium Co. (Balco), the Union government is preparing to sell its remaining stake in the company in the next fiscal year, two people aware of the development said.

The Union ministry has already reached out to the Department of Investment and Public Asset Management (Dipam) for a road map for the stake sale, the people said on the condition of anonymity.

“The ministry of mines has now sought fresh advice from Dipam on the roadmap for the disinvestment of Balco, which has been in the works for several years. Once this is finalized, the process to appoint transaction advisers and legal advisers may be initiated to start the share sale plan in Balco in the next year,” one of the two persons cited above said.

The government sold a 51% stake in Balco to Sterlite Industries Ltd, a unit of Vedanta Ltd, as part of its privatization in 2001 but continued to hold the rest. The government has discussed the sale of the balance of 41% ever since, but the process never took off due to a lack of clarity over the valuation of shares and the rights of the majority shareholder. Though the government has a free hand in deciding the mode, valuation and quantum of share sale thanks to various court verdicts and favourable legal opinion, it has so far not worked out the modalities and timing of its disinvestment plan.

The government may sell the stake in an auction (offer for sale), and may choose to sell it in tranches, the person quoted above said. It may also decide to retain some equity, the quantum of which will be decided once Dipam finalizes a roadmap for disinvestment. Market regulator Sebi will also be consulted to prevent any hiccup in the share sale plan.

The mines ministry said that as the matter pertains to Dipam, its inputs should be sought while not offering any other comment. Questions sent to the finance ministry and Dipam remained unanswered till press time. Vedanta did not respond to queries, but an official said on the condition of anonymity that there was no development on this issue from the company’s side.

Since Vedanta is the majority owner of Balco, the government is expected to keep it informed about the modalities of the share sale. But Vedanta would not be in a position to block the share sale or influence its valuation. It may also not be permitted to purchase Balco shares from the government in bulk, the two people cited earlier said.

On many occasions, Vedanta has expressed interest in buying the residual stake, but the government is keen to approach the market to get the best value for its holding.

Balco is a premium aluminium producer accounting for about 20% of India’s total aluminium capacity. In FY22, it reported a net profit of close to 2,900 crore on revenue from operations of over 13,600 crore.

The company has a total capacity of 570,000 tonnes per annum and 2,010 megawatts of power plants, including captive and independent power plants.

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