Govt. to sell majority stake in BALCO to Sterlite

By Our Special Correspondent

NEW DELHI, FEB. 21. The Government has decided to sell majority equity of 51 per cent in the large and profit-making Bharat Aluminium Company Limited (BALCO) to Sterlite Industries. The private company, which currently has a five to six per cent market share in the aluminium sector, made an offer of Rs. 551.5 crores. The new acquisition will bring Sterlite's market share to about 20 per cent.

This is the first major step towards privatisation of public sector companies this year though it is a far cry from the disinvestment target of Rs. 10,000 crores for this year. It is also the first time Government's stake has been reduced from 100 per cent to less than 50 per cent in one stroke. Besides, BALCO has earned profits of Rs. 110 crore in the last fiscal though it needs an infusion of funds for upgrading technology. The interests of its 7,000 employees have been protected in the shareholders' agreement for at least one year.

Announcing this here today after the decision was taken by the Cabinet Committee on Disinvestment (CCD), the Minister of State for Disinvestment, Mr. Arun Shourie, denied that the disinvestment was being done in haste. The Disinvestment Commission had made the recommendation for sale to a strategic partner way back in 1997. For the last two years, he said the Department of Mines had been proceeding with the process of disinvestment. Apart from the Disinvestment Ministry, the Law Ministry had also been consulted on several issues while all documents relating to the transaction would be handed over for scrutiny to the Comptroller and Auditor-General (CAG). ``There has thus been due diligence, transparency and accountability,'' he said.

Mr. Shourie pointed out that the actual value realised from the entire disinvestment process was over Rs. 800 crores. This was a result of capital restructuring carried out prior to the actual disinvestment when the equity base was reduced by 50 per cent. This brought down the equity from Rs. 488 crores to Rs. 244 crores by using the company's cash surplus. An additional Rs. 30 crores was realised as tax on the amount treated as deemed dividend.

Stressing the efforts made in ensuring that due diligence was carried out in the disinvestment process, Mr. Shourie said the Disinvestment's Commission's proposal for selling 40 per cent equity to a strategic partner followed by two tranches of domestic market sales was accepted by the Cabinet in September 1997.

But market conditions were not favourable as London Metal Exchange (LME) aluminium prices were in decline and the capital markets were down. The Commission Chairman thus advised in June 1998 an upfront 51 per cent sale to the strategic partner.

Finally, he said the decision to reduce Government holding to 49 per cent was taken in March 1999. Mr. Shourie took the opportunity to profusely thank the Chief Ministers of Orissa, Chhatisgarh and Madhya Pradesh for their cooperation in the disinvestment process. He also emphasised that the trade unions had appreciated the fact that their interests were being fully taken into account. This was despite the earlier writ petition filed by the unions against the sale of Government equity.

Under the terms of agreement, there would be no retrenchment for one year. Even subsequently, any offer of voluntary retirement scheme (VRS) would have to be as generous as it is presently, Mr. Shourie said.

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