Stake sale in Hindustan Zinc, Balco in next year only: Mayaram

Disinvestment of government's remaining stake in Hindustan Zinc and Balco will happen next fiscal, Economic Affairs Secretary Arvind Mayaram today said.

"The decision to divest stakes (in the two companies) stands. However, the process may not be completed this year before March 31. Therefore, we have kept it for the next year," he said in a press conference of Finance Minister P Chidmabaram after the presentation of Interim Budget.

The Cabinet Committee on Economic Affairs (CCEA) has already given its approval for sale of government stake in the two erstwhile public sector companies. The stake sale is expected to happen through auction route.

Government had sold majority stakes in the two companies to mining conglomerate Vedanta group during 2001-2003. It at present holds 29.54 per cent stake in Hindustan Zinc and 49 per cent stake in Bharat Aluminium Company Ltd (Balco).

As per the Interim Budget documents, government has pruned its target to Rs 3,000 crore for the current fiscal from earlier estimates of Rs 14,000 crore from selling its stakes in non-government companies.

Accordingly, total proceeds from disinvesting government shares in PSUs and residual stake sales have been revised to Rs 19,027 crore for 2013-14, against targeted Rs 54,000 crore.

For 2014-15, the disinvestment proceeds have been estimated at Rs 51,925 crore. Of this, Rs 36,925 crore has been estimated from selling stakes in public sector companies and Rs 15,000 crore from residual stake sales in companies, including Hindustan Zinc and Balco.

Recently the process to finalise valuation of the two firms was started by the government. While valuation for 29.54 per cent stake in Hindustan Zinc is not expected to be a major concern as it is listed on stock exchanges, valuation of 49 per cent shares in unlisted-Balco will be done afresh.

At today's closing price of Rs 123.50 per share, value of government's remaining stake in Hindustan Zinc, amounting to over 124.79 crore, stood at Rs 15,381 crore.

Industry insiders have been estimating that government's realisation from the auction of remaining shares in HZL and Balco would be over Rs 20,000 crore, much more than 2014-15's target of Rs 15,000 crore.

This is largely due to the profile of Hindustan Zinc --the most profitable firm in the Vedanta group stable. The company has been sitting on a cash reserves of Rs 24,095 crore as on December, 2013 and had reported a net profit of Rs 5,023 crore during the first nine months of the current fiscal.

Vedanta is also expected to bid very aggressively for acquiring most of the government shares in HZL to get complete control on the company. The mining conglomerate already has shareholders' nod to make the offer up till Rs 21,637 crore for remaining government stake.

Share sale of remaining government stake in Balco is expected to be around Rs 3,500 crore, though valuation has not yet been completed. Vedanta has its shareholders nod to make an offer of up to Rs 3,026 crore for Balco.

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