Govt likely to divest remaining Balco shares via auction route

The government is likely to sell its remaining stake in aluminium major Balco through auction route following Law Ministry's opinion that "there appears no constitutional or legal issue involved" in selling shares of the company via offer for sale (OFS) method.
The Mines Ministry -- the parent ministry of Balco -- will now prepare a final note for the Cabinet Committee on Economic Affairs (CCEA) for the stake sale via OFS route as the government is aiming to conclude it in the current fiscal itself, sources said.
The move is intended to meet this year's disinvestment target of Rs 55,000 crore, including selling residual stakes in some firms and is as per the decision taken in the high level meeting chaired by the Prime Minister on December 3, 2013, they said.

The Attorney General (AG), in his opinion of December 2, 2013, has said that government is "at liberty to dispose off its residual stake in Balco by Offer for Sale route".
After this, the Law Ministry opined that "subject to AG's opinions and noticing that there appears no constitutional or legal issue involved in the matter and that the proposal in the Note is a policy decision, we may concur in."
The opinion will be sent to the Mines Ministry in next few days for moving a final note to the CCEA, sources said.

However, selling residual stake of the government in Hindustan Zinc may take some time as opinion of the AG, as directed by the Prime Minister on December 3, is still awaited. AG's opinion was sought on various issues, including amending Metal Corporation (Nationalisation and Miscellaneous Provisions) Act, 1976.

Government had sold 51 per cent stake in Bharat Aluminium Company Ltd (Balco) to Vedanta Group firm Sterlite Industries (now Sesa Sterlite) in 2001. Valuation of remaining 49 per cent stake in Balco has remained a bone of contention between them as the aluminium major is not a listed entity.
In March, 2004, the aluminium producer was valued at USD 193 million (at that time's prevailing dollar-rupee exchange rate) by an independent third party evaluator, which was appointed by both the sides.
In March, 2007, Vedanta alone went for an independent third party valuation of Balco and the evaluator valued the company at USD 286 million (at then prevailing exchange rate).

Since then, Vedanta has been arguing that valuation of March, 2007 should be taken into account while valuing remaining 49 per cent stake of government in Balco.
However, the government had disagreed with this opinion and has been in favour of going for a new valuation at current prices of the company.
Sterlite Industries (now Sesa Sterlite), which acquired Balco in 2001, had lost an arbitration case in January, 2011. The case was related to various issues of the share purchase agreement, including exercising call option and right of first refusal. The matter is currently pending in the Delhi High Court.