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Business News/ Companies / Vedanta’s residual stake buy plan awaits GoM decision
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Vedanta’s residual stake buy plan awaits GoM decision

Vedanta’s residual stake buy plan awaits GoM decision

Integration plan: Vedanta Resources chairman Anil Agarwal told reporters on Saturday that he expects to buy the remaining stakes owned by the government in the two companies by December.(Mint)Premium

Integration plan: Vedanta Resources chairman Anil Agarwal told reporters on Saturday that he expects to buy the remaining stakes owned by the government in the two companies by December.(Mint)

New Delhi: Vedanta Resources Plc’s proposal to buy the government’s remaining stakes in Bharat Aluminium Co. Ltd (Balco) and Hindustan Zinc Ltd is being studied and will be sent to a group of ministers for a final decision, two government officials handling the matter said.

“It’s with the committee of secretaries," said one official, who declined to be named, adding that Vedanta has proposed to purchase the government’s 29.54% stake in Hindustan Zinc and 49% in Balco. “Ultimately, the group of ministers will decide."

Integration plan: Vedanta Resources chairman Anil Agarwal told reporters on Saturday that he expects to buy the remaining stakes owned by the government in the two companies by December.(Mint)

At the same time, the stake sale will help the government raise some money for its 40,000 crore asset-sale target for the year to 31 March.

“Difficulties in valuations apart, the government is now ready in principle to sell their stakes in Balco and Hindustan Zinc owing to their fiscal deficit and disinvestment target pressures," said Arun Kejriwal, director of Mumbai-based equity research firm KRIS. “Getting full control of the two companies will be good for Vedanta as they won’t have to get clearances for every operational move in the companies."

On Saturday, Vedanta merged miner Sesa Goa Ltd with copper producer Sterlite Industries Ltd. Sterlite’s shareholders will get three shares of Sesa for every five held.

The merged Sesa Sterlite will own stakes in Hindustan Zinc, Balco, Cairn India Ltd, Vedanta Aluminium Ltd and some other companies.

The government had sold a 51% stake in Balco for 551 crore in 2001 and 64% in Hindustan Zinc for more than 750 crore in 2003 to Sterlite as part of an asset-sale programme to raise revenue.

Vedanta had submitted various options for buying the residual stakes in Balco and Hindustan Zinc, a plan pending since 2007 with one of the sticking points being valuation of the stakes, Mint reported on 25 January. Hindustan Zinc is publicly traded, but Balco is not.

A long drawn-out arbitration process had prevented Vedanta from acquiring the government’s stake in Balco in the past few years.

“The government wanted our response and we have given it," S.K. Roongta, managing director of Vedanta Aluminium, said in an interview. “The ball is in the government’s court."

On Saturday, Vedanta Resources chairman Anil Agarwal told reporters in Mumbai that he expects to buy the remaining stakes owned by the government in the two companies by December.

“This is one of the critical steps to watch out for," said Rakesh Arora, managing director and head of research, India, at Macquarie Capital Securities (India) Pvt. Ltd. “Because cash is getting accumulated in Hindustan Zinc and it has to be used."

A Vedanta official, who declined to be identified, said shareholders of its group companies are likely to approve the restructuring, unlike in 2008, when stockholders rejected the company’s proposal to restructure the group into four companies that would have held the group’s copper, aluminium, zinc and lead, and energy assets.

The objective of the restructuring was consistent with its strategy to consolidate and simplify the group structure and eliminate cross-holdings, Vedanta said in a presentation. It has also been done to lessen cost of capital and to give access to capital, it said.

Vedanta would transfer its 38.8% stake and $5.9 billlion debt in Cairn India for $1 to Sesa Sterlite, which would now own 58.9% in the oil explorer.

Shares of Sesa Goa are expected to decline on BSE on Monday, while Sterlite is expected to rise, said Jagannadham Thunuguntla, strategist and head of research at SMC Global Securities Ltd.

“Three shares of Sesa Goa would give a price of 680, while five shares of Sterlite would give a price of 590, so the holder of Sterlite shares would be at an advantage," Thunuguntla said.

On Friday, shares of Sesa Goa fell 0.13% to 227.35 on BSE. Shares of Sterlite Industries closed at 118.65, up 3.17%. The benchmark Sensex fell 0.86%.

ruchira.s@livemint.com

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Published: 26 Feb 2012, 10:31 PM IST
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