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BALCO sale to spur future privatisations

The government's success in selling a majority stake in aluminium maker BALCO has injected new life into its decade-old privatisation drive and set the stage for quicker sell-offs in the months ahead, analysts said on Thursday.

The government on Wednesday sold off a 51 per cent controlling stake in Bharat Aluminium Co Ltd to private copper and aluminium maker Sterlite Industries for Rs 5.51 billion, wrapping up this year's first big-ticket privatisation.

Analysts said the move would give a strong boost to the country's sputtering privatisation programme by giving it much-needed credibility and pave the way for faster sell-offs in the coming months.

"It is a very significant decision. What was intent until now has become a reality. The government will now be emboldened to complete its privatisation programme," Shekar Sathe, chief executive officer of Kotak Mahindra Asset Management Company, said.

The government has kicked off the sell-off process for a number of firms this year including its two unlisted airlines, national flag carrier Air India and domestic carrier Indian Airlines.

Also on the list of high-profile strategic sales are monopoly international telephony provider Videsh Sanchar Nigam Ltd (VSNL) and state-run information technology firm CMC Ltd.

Last week, it announced plans to lower its stake in the country's largest car maker Maruti Udyog Ltd (MUL), its equal joint venture with Japan's Suzuki Motor Co.

Despite the sell-off news, the stock markets remained in negative zone, on Thursday, weighed down by the overnight fall of the tech-heavy US Nasdaq exchange.

MANY FIRSTS

The government's decision on BALCO marks a significant break away from its earlier policy of shedding only piecemeal stakes in state-run firms to transferring management control to private partners.

Also significant is that the government has for the first time sold a profit-making company, shedding a previous policy of selling only loss-making companies.

In nearly a decade of economic reforms, India has notched up only one strategic sale -- last year, it sold loss-making bread maker Modern Foods to consumer products giant Hindustan Lever Ltd, a unit of Anglo-Dutch conglomerate Unilever Plc.

"Though this one took time, there was a lot of learning. This will form the basis for many quick decisions in the future. You don't have to re-invent the wheel now," R Srinivasan, resident director at JP Morgan Chase, said.

The BALCO sale came after a four-year-long drama that saw political opposition, legal hurdles and labour resistance. The Divestment Commission recommended the sell-off in 1997.

"To the government's credit, it very deftly handled an extremely complex process which had a lot of legal and procedural obstacles," added Srinivasan, whose firm advised the government on the BALCO sale.

"They have built an excellent foundation with this sale."

MISS TARGET

But its maiden success this year is unlikely to help the government meet its privatisation target for the year, a fact which it has already acknowledged.

The government had targeted a sum of Rs 100 billion from privatisation receipts in the 2000/01 (April-March) budget, but has admitted earlier that it would fall way short of the target.

It may end the year, which ends on March 31 with receipts of just Rs 5.51 billion, all from the BALCO sale.

Of the Rs 443 billion targeted over the past nine annual budgets, the government has just been able to mop up Rs 183.93 billion till the end of last fiscal 1999/00 (April-March).

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