Government Offloads NALCO Stake; SAIL Next

Last week, the Indian government finally decided to disinvest up to 10 percent of its shares in one of its prized companies: National Aluminum Co. Ltd (NALCO) – an issue that was hanging fire for a while.

The Empowered Group of Ministers, headed by Finance Minister P. Chidambaram had fixed the floor price at US $0.74 (Rs 40) per share in NALCO through auction in two stages.

NALCO is India’s third-largest producer of aluminum. It operates an alumina refinery, smelter and bauxite mines in the mineral-rich eastern state of Odisha.

The share sale through offer for sale (OFS) route was held on Friday, and the government raised US $116 million by selling 5 percent (128.86 million shares) of the total approved 10 percent of its shares. It still retained the option to sell 5 percent more, at a minimum offer price of US $0.74 a share. At the stock market, shares in the company valued at about $2 billion ended down 8.5 percent on Friday, just above $0.74.

According to Reuters, the single-day NALCO auction received bids for a total of 156.94 million shares. Following today’s 5 percent auction sale, the government’s holding in the company will come down to 81 percent.

Another report in the Hindu BusinessLine said the auction had received bids for its shares, at prices ranging between $0.74 and $0.75 (Rs 40 and Rs 41) in the first round itself.

The share sale is part of the government’s divestment drive to help restrict the fiscal deficit to 5.2 percent in the year ending March 31. As well as the NALCO issue, the government has so far raised almost $4.1 billion through the sale of shares in state-owned companies this fiscal year.

Next week, it will start the process of selling a 10.82 percent stake sale in another of its prized metal-producing companies, the Steel Authority of India Ltd (SAIL). Once done, that could net about $550 million for the government’s kitty. The government currently holds an 85.82 percent stake in SAIL.

In July last year, the Cabinet Committee on Economic Affairs (CCEA) cleared the disinvestment of NALCO, but the government had by then deferred the disinvestment, claiming economic conditions were not ripe. For the sale of its shares, the government had also done its pitch in road shows in US, Singapore and other countries. The finance ministry had said the sale could mop up approximately US $259 million for the exchequer.

The aluminum major reported a more-than-two-fold jump in its October-December quarter net profit to US $21 million on the back of improved sales. NALCO had a profit of $9 million in the same period last year.

by Sohrab Darabshaw