Govt to sell stakes in Hindustan Zinc, Balco

New Delhi: The government on Monday decided to sell its residual stake in Anil Agarwal-controlled companies Hindustan Zinc Ltd and Bharat Aluminium Co. Ltd (Balco) in an open market auction.

The decision, taken by the cabinet committee on economic affairs (CCEA), is expected to fetch the government about ₹ 21,000 crore.

The government holds 29.5% stake in Hindustan Zinc and 49% in Balco, an unlisted company.

It had sold controlling stakes in these companies between 2001 and 2003. At current valuation, the government’s stake in Hindustan Zinc is worth ₹ 16,847 crore and in Balco, ₹ 4,000 crore.

“It has been cleared,” news agency Press Trust of India quoted commerce and industry minister Anand Sharma as saying after a meeting of the CCEA headed by Prime Minister Manmohan Singh.

Mint couldn’t independently verify this although TV channel CNBC-TV18 said the same, citing unnamed government officials.

London-based Vedanta Resources Plc holds majority stakes in both the companies. The company could not be immediately reached for comments.

An analyst working for a Mumbai-based brokerage welcomed the decision.

“At present, Hindustan Zinc is sitting on huge cash reserves of around ₹ 22,000 crore. It would be able to use it now,” he said, requesting anonymity.

In the long run, Vedanta may merge Hindustan Zinc with Sesa Sterlite Ltd, he added.

The government’s decision comes after attorney general of India G.E. Vahanvati last week recommended that it sell its stakes in these companies in the open market.

“We have very clearly recommended that there should be no put and call option given to the original buyer (Vedanta Resources). It should be auctioned. No first right of refusal, but they will have a right to participate in the auction,” economic affairs secretary Arvind Mayaram said last week.

The stake sale proposal became controversial for two reasons. One, the government dragged its feet over the sale of its residual stake in Hindustan Zinc to Vedanta. Two, the valuation of Hindustan Zinc has come under a cloud following allegations that the government’s valuer ignored some of the company’s mines.

The stake sale will take the government closer to its overall disinvestment target of ₹ 54,000 crore for this financial year and could help contain fiscal deficit at 4.8% of gross domestic product.

So far in 2013-14, the government has received less than ₹ 3,000 crore by selling its shares in state-owned firms.

Meanwhile, the Central Bureau of Investigation (CBI) is inquiring into suspected irregularities in the divestment of a 26% stake in Hindustan Zinc by the government to Vedanta’s Sterlite Industries (India) Ltd in 2002, when the Bharatiya Janata Party-led National Democratic Alliance, now the main opposition grouping, was in government.

On 23 December, CBI registered a so-called preliminary enquiry against Vedanta chairman Anil Agarwal and others in the case.

Subsequent to the 26% stake sale in 2002, the government in 2003 sold an additional 18.92% of Hindustan Zinc to Sterlite for ₹ 323.88 crore. Vedanta group acquired a majority stake in Balco at the same time.

Sterlite acquired another 20% in Hindustan Zinc through an open offer to public shareholders. Sterlite merged with Sesa Goa Ltd, also a part of Vedanta, last year.

PTI contributed to this story.