Govt holds talks with BALCO for withdrawing arbitration, initiating IPO

The govt is looking to sell a part of its residual 49% stake in Balco through a public offer, DIPAM Secy said

The government is looking to sell a part of its residual 49 per cent stake in Balco through a public offer and is engaging with the firm's promoter Vedanta to withdraw arbitration and facilitate stock exchanges listing of the company, DIPAM Secretary Tuhin Kanta Pandey said.

The Ministry of Mines and the Department of Investment and Public Asset Management (DIPAM) have held 'preliminary talks' with Vedanta Ltd -- the promoters of erstwhile public sector company BALCO, he said. BALCO has to withdraw a 2009 arbitration case it filed against the government over valuation dispute of the residual stake.

"We have talked (with BALCO promoters) at preliminary level. We will engage with them in detail. If we have to do public listing, they (Vedanta) will have to withdraw the case. If they agree then we can move forward," Pandey told PTI.

The government wants to sell part of its 49 per cent stake in BALCO in the initial public offering (IPO) before eventually exiting the company. A stock exchange listing would give an idea on the fair valuation of BALCO.

The government had in 2001 sold 51 per cent stake in the then state-owned Bharat Aluminium Company Ltd (BALCO) to Sterlite Industries Ltd, a subsidiary of Vedanta Ltd, for Rs 551 crore. The remaining 49 per cent is with the government of India.

The deal had a call option in the shareholder agreement which allowed Sterlite Industries to acquire residual 49 per cent stake from the government by March 2004. When Sterlite offered Rs 1,099 crore in 2004 for buying the residual stake, the government rejected it as a Comptroller and Auditor General (CAG) report had said that BALCO valuation should be higher.

Following this, Anil Agarwal-led Vedanta Group initiated arbitration against the government in 2009.

The BALCO arbitration story is the same as that of Hindustan Zinc (HZL) in which Vedanta had initiated arbitration against the government in 2009, but the Supreme Court in November 2021 allowed the government to proceed with open market sale of its 29.5 per cent in the zinc company, instead of selling the stake to the promoters of the company.

The government had sold 40.99 per cent stake in HZL in two tranches in 2002-03 and 2003-04 for Rs 769 crore to Sterlite and the deal had a call option which allowed Sterlite to acquire the government's 29.5 per cent. Subsequently, dispute over valuation led to the government rejecting the offer and Vedanta initiated arbitration in 2009.

Following the Supreme Court verdict, Vedanta withdrew the arbitration in 2022, and the government is now preparing for an offer for sale (OFS) of its 29.5 per cent stake in HZL.

The push for a stake sale in BALCO is in line with the government's Public Sector Enterprises (PSE) policy under which the government intends to exit from non-strategic sectors and minimise the presence of government in PSEs across sectors of economy and to make available newer investment opportunities for private sector.

The Budget has set a Rs 51,000 crore target from selling government stake in companies. Of this, the government has so far mopped up over Rs 4,000 crore from Coal India Offer for Sale (OFS) earlier this month.