NEW DELHI, March 9: Bharat Aluminium Company's capital restructuring proposal has been put on hold to enable global advisors for the company's disinvestment exercise to have a say in the process.Government sources said capital restructuring in Balco, if any, would be considered along with the disinvestment proposal. The ambit of the scheme, proposing conversion of 50 per cent of Balco's equity into government loans, was "limited in scope," the sources said, pointing out that a more comprehensive restructuring of the PSU may be necessary before it could be offered for sale.
Meanwhile, the inter-ministerial group on disinvestment, is scheduled to meet later this month to consider the bids of merchant bankers and financial institutions, offering to advise the strategic sale in Balco and the Kudremukh Iron Ore Company (KIOCL).
The inter-ministerial group received bids from global advisors in mid-January, but its work schedule got thrown out of gear after elections were announced soon afterwards. The grouphas already appointed SBI Capital Markets as consultant for the centre's 40 per cent strategic sale in Balco.
The Industrial Development Bank of India (IDBI) is the consultant for the strategic sale of 30 per cent government equity in KIOCL. The disinvestment commission had put both Balco and KIOCL on the chopping block as early as September, 1996. The centre has since decided to appoint a merchant banker or financial institution of repute to advise the union steel ministry on the strategic sale in KIOCL. A global advisor will also monitor the divestment of 40 per cent government equity in Balco to a strategic partner.
The centre is committed to offload another 26 per cent of its stake in the aluminium producing outfit through a public issue within the ensuing two years. It should, subsequently, divest the remaining 26 per cent of its shareholding "at an appropriate time". The Balco board was of the opinion that a financial restructuring of the aluminium company would spruce up its books of accounts,improve its earnings per share and so help the centre procure a better price for the scrip. In June last year the Balco board approved the conversion of half the company's paid-up equity of Rs 408 crore into government loans.
The proposal was a modification of a capital restructuring scheme that had been pending for three years. The first scheme, drawn up by SBI Capital Markets, proposed converting 75 per cent of Balco's share capital into government debt.
The Rs 760 crore-turnover aluminium producer planned to pay off the government debt in five equal installments, with an interest of 8.5 per cent. Since the government holding in Balco is 100 per cent, the company's scrip is not listed and so, is likely to be evaluated on its book value.
Sources associated with the disinvestment process say, however, that they were confident that the PSU shares would only be offered to a strategic partner at the best possible price. Recently, the grapevine was abuzz with whispers that Canadian aluminium giant Alcan wasalready keen to pick up the strategic stake in Balco.
That Alcan was keen on a larger presence in the aluminium market here has already been demonstrated by its decision to be the fourth partner in the Utkal Alumina project, along with the Indian Aluminium Company (Indal), Tata Industries and Norsk Hydro. Alcan has also made a counter-bid to the Sterlite offer for the shares of its Indian alliance, Indal.
