Metal and mining firm Vedanta Resources has offered to buy out the government’s residual minority stake in its group firms Bharat Aluminum Company Limited and Hindustan Zinc Limited.
An official familiar with the development said that they have written a letter. They have given us an offer. Various proposals have been put up which we have to analyze.
The government had sold a 51% stake in Balco for INR 551 crore in 2001 and 64% in Hindustan Zinc for over INR 750 crore in 2003 to Vedanta as part of its disinvestment program. A long drawn out arbitration process had prevented Vedanta from acquiring the government’s residual stake in Balco in the past few years.
An arbitration panel in January 2011 allowed the government to sell its residual 49% stake in Balco as it deems fit, striking down Vedanta unit Sterlite Industries’ call option to acquire the balance 49% stake as invalid.
The official said that the ministries concerned are discussing Vedanta’s offer but there was no deadline for a final decision on the matter. The proposals are for both companies, each is valued differently. Balco is not listed but HZL is a slightly different case.
The acquisition of the residual equity in the two companies is crucial for Vedanta’s overall corporate restructuring program into a commodity focused vertical. Vedanta intends to use the cash reserves of Balco and HZL to fund its expansion plans once its buys out the government stake.
Moody’s Investor Service said recently that the subsidiaries based in India are restricted from guaranteeing the debts of the UK-based parent. The most profitable subsidiary HZL is restricted from using its money outside of the HZL operation and a similar arrangement applies at Balco, where the government of India is also a significant shareholder.
Aluminum is key to growth for the company that has invested heavily in its Orissa refinery and smelter but has been barred from expansion under environment norms and does not own a captive bauxite mine either.
Mr Mukesh Kumar president of Vedanta Aluminum Limited said that “We will seek the permission of the ministry of environment and forests for allowing us to expand our refinery.”
(Sourced from Livemint.com
