Sterlite cheque for Balco stumps govt

Sterlite cheque for Balco stumps govt

JAYANTA ROY CHOWDHURY

14th April 2006

New Delhi: In a surprise move, Sterlite Industries Ltd has sent a cheque for Rs 1,098.89 crore to the Union government for the transfer of the latter’s remaining 49 per cent stake in Bharat Aluminium Company Ltd.

The move has forced the government to call a meeting of the core group on disinvestment, to be followed by a meeting of the Cabinet Committee on Economic Affairs.

The cheque drawn in favour of the department of economic affairs, ministry of finance, was sent to the secretary of mines along with a covering letter.

The move comes in the midst of a raging controversy within the government over the price at which the rump shares were to be sold to Sterlite and whether there was at all any need for the government to sell the shares.

A note sent by the ministry of mines to the finance ministry and other ministries concerned, says the “immediate cause and intent of the strategic partner (Sterlite), behind sending the letter and the cheque is not clear.” The cheque amount has been determined on the basis of a reference price of Rs 101.65 a share set by SBI Caps, though Sterlite's letter to the government says the final price will be settled through arbitration.

A few years back, Sterlite had picked up a 51 per cent stake in Balco for just Rs 550 crore. The sale itself and the price at which the state-run aluminium major was sold created a furore in Parliament. Since then, Sterlite Industries had been taken over by Vedanta Plc, a London-based metal firm. A meeting of the core group on disinvestment held earlier this year sought the law ministry’s opinion on whether Sterlite’s intention to buy Balco shares was still valid as 24 months had lapsed since the cut-off date.

A note for the upcoming core group meeting says that law firm Amarchand Mangaldas has given an opinion that the valuation could be considered flawed if there is an apparent illegality, bias or partiality. It also points out that minister of mines Sis Ram Ola has received references which claimed the valuation was too low, especially as Sterlite was quoting on the bourses at Rs 1,400 a share recently. It adds the references contend that Balco stock as such should not cost less than Rs 1,000 a share.

Earlier too, the government had been in a bother over the rump share sale issue after officials pointed out that Sterlite's management structure itself has changed since it bought Balco when the NDA was in power.

Sterlite sold majority holding to London-based Vedanta, two years ago. However, the government ultimately accepted Sterlite's contention that there has been no real change in ownership as Vedanta too is owned by the Agarwal family which owns Sterlite.