November 22, 2008

Sterlite may go for arbitration for BALCO residual stake sale

BS reported that India’s largest copper producer Sterlite Industries may enter into arbitration for the purchase of the residual 49% government stake in Bharat Aluminum Company.

The report cited a Sterlite Industries official as per saying that this comes after both parties failed to arrive at an agreement on an appropriate valuation of the stake.

Mr Pramod Suri CEO Aluminum business at Vedanta Resources the parent company of Sterlite said that “Mediation has not helped to reach any settlement and it may go to arbitration now.”

Sterlite bought 51% stake in Balco in March 2001 for INR 552 crore when the National Democratic Alliance government decided to divest the government stake in the public sector company. Sterlite owned the right to purchase the remaining stake in BALCO after a three year embargo. According to the shareholders’ agreement, Sterlite sent a call notice with a cheque of INR 1,099 crore to acquire the residual stake of BALCO, after the expiry period in March 2004. Differences in the value of the government’s residual stake cropped up after the United Progressive Alliance came to power in 2004.

Sterlite moved the Delhi High Court in 2006 following a Comptroller and Auditor General’s report, which pegged the value of the residual share much higher than what Sterlite had offered. The court asked Sterlite and the government to settle the matter amicably, through conciliation or to go in for arbitration. The government directed a committee of secretaries to strive for reconciliation as directed by the high court.