Drop arbitration, list Balco: Govt to Vedanta – The Financial Express

The Financial Express
While the government is slated to sell a portion of its residual stake in Vedanta-controlled Hindustan Zinc (HZL) to the public in 2023, it has also firmed up a plan to sell its 49% stake in Bharat Aluminium Company (Balco), another metal company which went to the Anil Agarwal-led group in 2001. As a prelude to the sale, the government has urged Vedanta to drop the ongoing arbitration over the group’s plan to exercise call option to acquire the 49% government stake in Balco.
Department of investment and public asset management (Dipam) secretary Tuhin Kanta Pandey told FE that the government wants Vedanta to list Balco. In the IPO, the government would sell a portion of its stake in the company to discover the price of the stock, before fully exiting in due course.
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Sterlite Industries (now Vedanta) had bought 51% stake in the then state-run Balco for Rs 551.5 crore in 2000-01 and 40.99% in Hindustan Zinc in two tranches in 2002-03 and 2003-04 for Rs 769 crore. Both deals had call options in the shareholder’s agreement to acquire residual stake from the government. With the government reneging from its promise to sell residual stakes in both companies, Vedanta initiated arbitration against the government in both cases in 2009.
The Supreme Court had on November 18, 2021, allowed the Centre to disinvest its residual stake in HZL in the open market as it ceased to remain a government company. Following the judgment, Vedanta withdrew from arbitration in the case in early 2022. The government, which was about to sell a portion of its residual 29.54% stake (worth Rs 36,600 crore at current market price) by March 2023 in HZL, will now do so in FY24. The postponement was caused by the HZL’s plan to acquire promoter Vedanta’s global zinc assets for $2.981 billion (Rs 24,570 crore), which the government opposed on concerns including related party transactions and valuations of the deal.
However, the arbitration case is still pending in the tribunal with respect to the call option in Balco.
With the government having won a similar case in Supreme Court for the residual stake in Hindustan Zinc, officials reckon the outcome couldn’t be different for Balco.
“Our stand is consistent. In Paradeep Phosphates (PPL), we exited through IPO in 2022. So, wherever the government has a shareholding, we would not like to sell it to the promoter but go to the market. Which means we should go for the IPO float in Balco,” Pandey said.
Vedanta did not respond to queries in this regard.
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Balco remains the first integrated Indian aluminium manufacturer, established in 1965, engaged in mining, smelting, fabricating, and selling aluminium products, primarily in India and internationally. Its net profit rose 160% on year to Rs 2,736 crore in FY22 compared with Rs 1,050 crore in FY21.
In 2001-02, the government sold 74% of the unlisted Paradeep Phosphates to Zuari Maroc Phosphates for Rs 151.7 crore. Two decades after its privatisation, the government sold its residual 26% to garner Rs 471.5 crore in the IPO of the company in May 2022.
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