Search the Internet          Tips  Sites: Finance, Investment

Balco deal comes under govt scrutiny

BS Bureaus

The government will scrutinise the sale of Bharat Aluminium Company to Sterlite in the light of the Securities and Exchange Board of India's decision to ban the company from raising funds from the capital market for the next two years.

It will also consider whether to let the two other companies Videocon and BPL hit by the same ban to go ahead with bids for public sector companies, including Indian Airlines and VSNL. While Videocon has bid for a 26 per cent stake in Indian Airlines, BPL Communications recently made a bid for control of VSNL.

Divestment minister Arun Shourie said: "Since the primary reason for the government's divestment is its inability to pump more funds into public sector units, there would not be much point if the stake is sold to a company which will not be able to raise money from the market."

However, Tarun Jain, finance director of Sterlite told Business Standard that the "Sebi decision will not affect our ability to raise funds from the market as the buyback agreement with the government debars us from accessing the capital market for two years in any case."

In case of Videocon which has bid for Indian Airlines, while the civil aviation ministry has expressed concern over the ability of the company to be able to turn around the national carrier in the wake of the Sebi decision, Videocon International chief executive officer, Venugopal Dhoot said that it had never raised money on the debt market in the past.

"We will decide how to fund the restructuring and expansion for Indian Airlines soon," he added.

BPL officials were not available for comments.

The department of divestment has already written to the law ministry seeking clarifications on the Sebi order.

DoD will also ask Sebi to clarify whether the spirit of the order implies that these companies should be barred from bidding for PSUs in the future or whether it feels that the penalties imposed are enough by way of punishment.

"The law ministry will also be asked to clarify if the order is tantamount to blacklisting these companies and whether it will affect transactions which have already been completed," said Shourie.

"We will also ask whether the ban is on the entire group or on specific companies," he added. The ministry of mines will also be writing to the law ministry to seek clarifications on the issue.

Shourie said the same issues were being examined with regard to the appointment of Credit Suisse First Boston as a global advisor in the sale of VSNL.

CSFB has been banned by Sebi from accepting new business until further notice over alleged involvement in manipulation of domestic share prices.

Powered by

YOU MAY ALSO WANT TO READ:
The Captial Markets Crisis

The Rediff-Business Standard Special
The Budget 2001-2002 Special
Money
Business News

Tell us what you think of this report