Thursday, Nov 27, 2014

FinMin to tap Sebi for advice on residual stake sale in Balco

A file picture of Balco’s plant at Korba, Chhattisgarh. A file picture of Balco’s plant at Korba, Chhattisgarh.
Written by Surabhi | New Delhi | Posted: July 18, 2014 1:22 am

The finance ministry plans to approach market regulator Sebi for advice on how to sell its residual stake in Bharat Aluminium Company (Balco) in the open market when the firm is unlisted on the bourses.

“The approval from the Cabinet Committee on Economic Affairs had said that the residual shares in Balco have to be sold in the open market. I don’t know the mechanism of how this will be done as of now and I will have to discuss it with Sebi,” disinvestment secretary Ravi Mathur told The Indian Express.

In the case of Hindustan Zinc Ltd, the disinvestment will be relatively simpler as it is already listed on the bourses. “Sebi has also recently allowed non-promoters to sell shares through the offer for sale route,” said Mathur.

A decision on the procedure for stake sale in Balco is likely to be taken around September this year after the valuation report is submitted. “The valuation will take about eight weeks. So we will proceed on how to go about the stake sales in Balco as well as HZL after that,” said a source.

The department of disinvestment had on Wednesday appointed a valuer for the deal, and had earlier this month also appointed a valuer for the residual stake sale in Hindustan Zinc Ltd.

The Union Cabinet in February had approved sale of government’s 49 per cent stake in Balco, which according to official estimates will raise about Rs 1,500 crore. Previously in 2001, the Centre had sold 51 per cent of its stake in the company to Sterlite Industries. The company is not listed on the stock exchanges and has a paid-up capital of Rs 220.62 crore as on March 31, 2013.

While the government has previously listed PSUs on the bourses through initial public offerings, Balco is different from such disinvestment as it is unlisted.

Experts said the residual stake sale in Balco can be done through methods such as a closed auction. “For instance, the government can seek valuations from a number of firms based on which it can set the value of its stake and then set the reserve price. It can have a closed auction and sell shares based on bids,” said Prithvi Haldea, chairman and managing director PRIME Database.

The residual stake sale of 29.54 per cent government equity in HZL is expected to be simpler as the company is listed on the stock exchanges. Between 2002 and 2003, the Centre sold 64.92 per cent stake in the company to Sterlite Industries.

The disinvestment in HZL , which is likely to be routed through the auction method is estimated to raise at least Rs 20,000 crore at Thursday’s closing price of Rs 166.35 apiece on the BSE. In fact, the finance ministry is hopeful that it will raise much more than the targetted Rs 15,000 crore from the residual stake sale in the two continued…

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