As Agarwal sits quietly...

As Agarwal sits quietly...

NDTV Correspondent

9th May 2006

Sterlite's chief Anil Agarwal has been sitting quietly as the controversy about BALCO's valuation has been hitting media headlines but now sources close to him have started speaking out.

According to the Shareholders Agreement Sterlite had the first right to the government's stake.

Anytime that Sterlite would exercise that purchase option, the government would get 30 days to complete the valuation of its stake and another 30 days to complete the sale.

And Sterlite would have to pay a 14 per cent interest for that entire 60-day period.

Sterlite exercised its call option in March 2004 and according to the share holders’ agreement the government should have sold its stake within the next two months.

But the valuation report was only published in March 2006 two years after Sterlite wanted to buy out the government's stake.

BALCO's valuation took this long because all five valuers that had been decided on initially had to be disqualified and a new valuer had to be found".

The Attorney General says the valuers were disqualified because each of them had been employed by Sterlite at one time or the other so Sterlite is to blame for the delay.

Sources close to Sterlite on the other hand say it's the government which caused the delay by requesting for nine extensions between April 2004 and December 2005..

The AG says since Sterlite caused the delays it should pay interest at 14 per cent for the entire period of two years.

Sterlite on the other hand says it is legally bound to pay interest for just 60 days.

Sources close to Sterlite insist that despite the dispute over how much interest should be paid, they have already sent a cheque to the government for a sum of Rs 1098 crore - an amount that includes interest for two years.

The interest amount is subject to arbitration and Sterlite can claim it back in the future.

But there's more to the BALCO valuation drama than just a difference over interest payment.

Questions raised

The Attorney General has raised questions about the valuation done by SBI Caps saying it seems to be far too low at a time when aluminium prices are rising.

But sources close to Sterlite say similar questions had been raised about the valuation process when BALCO was first disinvested and the Supreme Court had give a clean chit to the sale at that time.

The AG's doubts have forced the valuation issue into the hands of the Cabinet Committee on Economic Affairs or CCEA.

But Sterlite argues the CCEA cannot be the right forum for BALCO's valuation especially since it has already been done by a professional valuer like SBI Caps.

Anil Agarwal has not only spent a lot of sweat and tears over BALCO, but Sterlite has also invested about Rs 4000 crore on the company.

Sources close to him say the money was spent in good faith because the government had assured Sterlite it will divest its entire stake.

But unfortunately for the Sterlite chief there's been a regime change since he first entered BALCO and the political winds seem to have turned against him.