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Sterlite bags Balco for Rs 551-cr -- Pips Hindalco, Alcoa in divestment of the year

Our Bureau

NEW DELHI, Feb. 21

THE Union Government today struck the first disinvestment deal in the current fiscal by approving the sale of 51 per cent stake in the aluminium major, Bharat Aluminium Co Ltd (Balco), to Sterlite Industries Ltd for a consideration of Rs 551.5 crore.

The Cabinet Committee on Disinvestment, at its meeting, endorsed the sale of Government equity in Balco along with the transfer of management control to the highest strategic bidder, wrapping up the sell-off process begun in June 2000, the Disinvestment Minister, Mr Arun Shourie, said.

This is the second privatisation of a public sector undertaking to be concluded by the Union Government after the strategic sale of Modern Food Industries Ltd to Hindustan Lever Ltd in March 2000.

Sterlite emerged the winner pipping two heavyweights -- the A.V. Birla group's Hindalco and the US-based Alcoa.

``The bid of Sterlite compares well with the expectation that the Government had formed with the reserve price,'' Mr Shourie said. However, he did not say what the reserve price was, except that it was less than the price quoted by Sterlite.

A profit-making public sector unit under the Ministry of Mines, Balco has a refinery, smelter and downstream complex at Korba, Madhya Pradesh, and another unit in Bidhanbag, West Bengal, with a total workforce of 7,000.

The total realisation for the Government from the sale would come to about Rs 800 crore after factoring in the Rs 244 crore which came into its kitty last fiscal as deemed dividend for halving the Government's equity in the company and the taxes accruing thereon of Rs 31 crore, Mr Shourie said.

He said the bids were valued by four different methods -- the discounted cash flow method, comparable valuation method, balance sheet valuation method and asset valuation method.

``Apart from the highest price, the business plan of Sterlite was the most credible,'' he said.

Dispelling fears on the employees' future post-disinvestment, Mr Shourie said the shareholders' agreement has provided several safety clauses for the workers.

In the first year after the takeover, there will not be any retrenchment at all. After the first year, if any retrenchment takes place, the VRS package offered would be as generous as the VRS package prevalent in PSUs.

However, Mr Pradeep Baijal, Disinvestment Secretary, said that both the sides envision that there will not be any retrenchment at all.

``The trade union leaders have expressed great satisfaction in this clause,'' Mr Shourie said. He reiterated that the entire process was concluded in a completely transparent manner after exercising due diligence at every step.

Three-year lock-in

THE Union Government has incorporated a three-year lock-in period in its shareholders' agreement with Sterlite, barring the latter from selling any of its 51 per cent stake in Balco during this period.

The Government is, however, free to sell its remaining stake of 49 per cent in Balco any time even after the strategic sale is concluded, a senior official in the Department of Disinvestment said.

Of its 49 per cent stake, the Government proposes to offload a portion to the public to enable its listing in the bourses. It will also offer an employees' stock option scheme to Balco workers from its holding.