Sterlite lone runner for HZL selloff

Mumbai: On 9 November, domain-B had reported that only two bidders were left in the fray for picking up the 26-per cent stake in the Hindustan Zinc (HZL) divestment scheme. Now the latest. Scared by the stringent conditions imposed by the government, the Lord Bagri-promoted Metdist, too, has opted out of the bidding process in the eleventh hour, leaving Sterlite as the lone survivor in the scheme.

Earlier this year, Sterlite had also walked away with Balco, a government-owned aluminium company, picking up a 51-per cent stake. If the cabinet committee on disinvestments finds the Sterlite's offer-price above its reserve price, then HZL will indeed be its, making it the only company in India to have picked up two public sector units.

The conditions found to be stringent by other suitors are:

1. The final bidder or the strategic partner will have to pay an interest of 12 per cent on the valuation of the remaining stake in HZL, from the date of acquiring the initial 26 per cent.
2. The final bidder, or the strategic partner, will have to make an open-offer for an additional 20 per cent under Sebi guidelines.
3. The government reserves the right to appoint five out of the 11 directors on the HZL board.
4. Sale of HZL also involves transfer of land, which will attract stamp duty @12 per cent on the value of land.

It is, however, learnt that Sterlite's bid has fallen short of the government's reserve price, which is said to have has been fixed at a little less than Rs 1,000 crore and to accommodate the same, the reserve price would be recalculated. The evaluation committee had arrived at the reserve price as the average of four valuation methods, discounted cash-flow, balance-sheet, comparable  companies and asset valuation.

The price thus arrived is found to have been on the higher side. There is a school of thought that feels that if the bids fall short of the reserve price, then the entire bidding process should be repeated. However, Disinvestment Minister Arun Shourie is believed to be in favour of going ahead with the divestment in the larger interest.