Govt sells 51 pc equity in BALCO to Sterlite

Govt sells 51 pc equity in BALCO to Sterlite
ENS ECONOMIC BUREAU

NEW DELHI, FEBRUARY 21: The Government has finally conducted its first and probably last sale of a public sector undertaking for the current fiscal year. It has sold 51 per cent equity in Bharat Aluminium Company Ltd (BALCO) to Sterlite Industries for Rs 551.5 crore. The remaining 49 per cent stake will be with the Government.

Speaking to reporters after the meeting of the Cabinet Committee on Disinvestment (CCD), Disinvestment Minister Arun Shourie, however, said the Government will actually realise a little over Rs 800 crore from this sale. Doling out statistics, he said BALCO had a cash surplus of Rs 244 crore in the year 1999-2000. The Government had also received Rs 31 crore as tax on this amount. ``So if we add this amount to what we will receive from Sterlite, the true value realised will be actually over Rs 800 crore,'' Shourie added.

Through capital restructuring, BALCO used its Rs 437-crore cash surplus to reduce its equity base of Rs 488 crore by 50 per cent. This was achieved in March 2000 and the company gave an amount of Rs 244 crore to the Government in 1999-2000.

``The sale agreement with Sterlite will be signed on Monday and money will be received simultaneously,'' Shourie said, adding that Sterlite's bid was the highest.

Earlier, the Sterlite bid was recommended by the Committee of Secretaries which compared four types of valuations -- designated cash flow, comparable valuation method, balance-sheet method and asset valuation.

According to the shareholders' agreement ``there will be no retrenchment in the first year. However, after one year, the Voluntary Retirement Scheme (VRS) will be as generous as prevalent today,'' the Minister added. At present, there are around 7000-odd employees in Balco and Shourie said trade union leaders are satisfied with the deal.

BALCO, with a sales turnover of about Rs 8000 crore, is the first large profit-making company where Government stake is being reduced from 100 per cent to below 50 per cent in one go. However, its profits have been declining. Against a net profit of Rs 60 crore last year, it is expecting a profit of only Rs 24 crore during the current fiscal year.

Earlier, the Disinvestment Commission had suggested sale of 40 per cent equity to a strategic partner. However, the Government later realised that such a sale would not fetch a good price. So in March 1999, the cabinet decided to sell 51 per cent stake upfront.