Mumbai: Sesa Goa Ltd., Sterlite Industries (India) Ltd. and Hindustan Zinc Ltd., controlled by billionaire Anil Agarwal, soared in Mumbai trading on optimism the government will expedite its plan to sell stakes in Hindustan Zinc and Bharat Aluminium Co. (Balco).
Sesa Goa, an iron ore miner, rose 16% to Rs151.10, the most since 19 September 2005, at close of trade in Mumbai. Sterlite Industries (India) Ltd., the country’s top copper producer, surged 9.8% to Rs83.10, the most since 18 May 2009. Hindustan Zinc, of which the government owns 29.5%, gained 13% to Rs119.20.
The government is in need of money to cut its rising current account deficit so it appears there will be extra effort to push the stake sale through, said Abhisar Jain, an analyst at Centrum Broking Pvt. Ltd. in Mumbai. Vedanta merged Sesa Goa and Sterlite and the merged entity will benefit from the cash surplus that Hindustan Zinc has but hasn’t been able to utilize. It also stands to benefit if the sale were to take place via an open auction as valuations have fallen.
Sterlite finance director Tarun Jain declined to comment. Sterlite owns 64.9% in Hindustan Zinc.
Vedanta group offered Rs17,000 crore ($2.7 billion) for the government’s remaining stakes in Hindustan Zinc and Balco, Vishwapati Trivedi, the then secretary at the ministry of mines, said on 22 March last year. Vedanta, in August last year, sought shareholder approval to raise by 15% its offer to buy the stake in Hindustan Zinc, which has cash and equivalents of $3.4 billion, according to Bloomberg-compiled data.
Agarwal’s plan to buy stakes may falter as the government insists on parliament’s approval for the deal, three people familiar with the decision said on 18 January.
The legal hurdles have been overcome and the stake sale in Hindustan Zinc may take place via an open auction, CNBC-TV18 channel reported, citing unidentified officials in the finance ministry.
Lack of full control at Hindustan Zinc has undermined decision-making at Vedanta. In 2010, Vedanta’s plan to buy Anglo American Plc’s Skorpion zinc mine in Namibia through Hindustan Zinc failed after the Indian government didn’t ratify the deal. Vedanta completed the purchase through Sterlite.
India’s current-account deficit widened to an unprecedented 4.8% of the gross domestic product (GDP) in the fiscal year ended 31 March, while the pace of economic growth dropped to a decade-low 5%, according to official figures.
Sesa Goa on 17 August said its merger with Sterlite has become effective. Trading in Sterlite shares will be suspended from 27 August, it said on Tuesday in an exchange filing. Bloomberg