Vedanta rebuffed - again

Vedanta rebuffed - again

29th December 2007

India's industrial lender, the IFCI, has rejected a bid by Vedanta Resources plc to take a 26% stake in the state-run corporation. The bid was made by Vedanta's New York registered subsidiary, Sterlite Industries (which launched on the New York Stock Exchange in 2006).

It's not the first time Vedanta has had to pocket a dream, rather than launch a potential new money-spinner. Three years ago Vedanta's effective owner, the notorious Anil Agarwal, tried to buy out the Indian government's minority stake in bauxite-aluminium subsidiary, Balco. He was rebuffed after accusations that Vedanta had commissioned valuations of Balco which deliberately under-valued the company.

In November 2007, Vedanta was told by the country's Supreme Court (SC) that it wouldn't be allowed to mine the bauxite-rich Nyamgiri hills in Orissa, following a damning report on the UK company's by Norway's publicly owned Oil Fund.

Ironically, the company selected by the SC to put together a SPV ("Special Purpose Vehicle") to mine Nyamgiri along with the Orissa state government, was Sterlite Industries India Ltd - effectively controlled by Sterlite Industries, itself controlled by Vedanta.

Meawhile, Vedanta has been accused of illegally laying a water pipeline in Orissa, to provide water for its planned aluminium smelter in Jharsaguda.

India's Development Finance Arm Nixes Stake Sale

Ruth David, Forbes.com

19th December 2007

State-run lender Industrial Finance Corporation of India on Wednesday called off its proposed sale of a 26% stake, for which a consortium consisting of Morgan Stanley and Sterlite Industries had emerged as the lead bidder.

"As the financial proposal submitted by the Sterlite Industries-led consortium was conditional, the board of directors of the company has unanimously decided that the conditional offer is not accepted," IFCI said in a note to the Bombay Stock Exchange after the markets closed.

The board has decided not to pursue any reopening of the bid process.

Media reports said IFCI wanted to take the Sterlite-Morgan Stanley consortium on board as a financial investor without management control.

"It is not so much an issue of management control as it is the fact that they wanted to give the stake to any bidder apart from an industrialhouse," said R. K. Gupta, whose fund, Taurus Asset Management, manages an estimated $160 million and has around 200,000 shares of IFCI.

If an existing bank or financial institution made a bid, the outcome could have been different. But if Sterlite had taken a stake in IFCI it was likely to apply for a banking license, and since the government hadn't agreed to grant other big industrial groups such a license, it couldn't do so for Sterlite, he said.

"We gave our best bid to achieve the objectives set out by IFCI for inviting a strategic partner," Dhanpal Jhaveri, a spokesman at Sterlite's parent company, Vedanta Resources, told journalists.

IFCI had announced in July that it wanted to sell its stake, inviting interest from investors like billionaire Wilbur Ross, Blackstone and Goldman Sachs. But as the stock rose significantly in recent months, investors dropped out because of high valuation. Sterlite-Morgan Stanley was one of three final bidders.

On Tuesday, the company decided to issue 123.77 million new shares to the public sector banks and financial institutions at an asking rate of 107 rupees ($2.71) per share. Its stock, which rose more than 8% this year, fell about 7% Tuesday because of uncertainty over the stake sale. On Wednesday, it was trading at 100.5 rupees ($2.54), down 0.6%, on the Bombay Stock Exchange.

In 2003, the government bailed out IFCI because of bad debts. It expects to receive $330 million next year as a part of that bailout package. This year, IFCI's performance improved as the company was able to recover nonperforming assets in sectors like textiles, sugar and steel, analysts said.

The company, which was set up in 1948 as the country's first development finance institution, saw net profits climb fourfold, to 4,972.90 million rupees ($125.77 million) for the quarter ending in September.

IFCI's stock is likely to see a knee-jerk reaction Thursday, and if the price drops to around 75 rupees ($1.89), it would make a good buy, saidGupta. The company's sale of fresh equity to banks and financial institutions will push its net worth up, and the improvement in non performing assets should bolster results in the next year. IFCI could also receive an infusion of funds from the World Bank's International Finance Corporation, which said earlier this month it was considering buying a 10% stake.

Industries default on water cess

Express News Service

29th December 2007

SAMBALPUR: The pending water cess dues of the industries drawing water from Hirakud Dam Reservoir to the State Government as on October 31, 2007 are running into more than Rs 5 crore.

Despite this Vedanta is laying a second pipeline allegedly ignoring the direction of IDCO, Forest Department and District Collector.

Even the State Government is yet to approve the design of the proposed pipeline of Vedanta. Also Rathi Steel is drawing water from Power Channel, which can best be termed as theft.

All these came to light at the Rehabilitation and Peripheral Development Advisory Committee meeting presided over by Revenue Divisional Commissioner (ND) here on Monday.

When Shyam DRI complained that Vedanta has been laying pipeline notified under 4/1 of Land Acquisition Act for them, the house expressed its concern and anguish at how Vedanta was confident that its plans and design would be approved by the State Government and other concerned authorities.

Similarly Rathi Steel was also caught on the wrong foot when it was asked from where it got water to begin production bringing to the fore illegal drawing of water by it from Power Channel.

The house was also informed that while SMC Steel and Power is liable to pay Rs 2.27 crore as pending water cess till October 2007, Eastern Steel and Power Limited has an arrears of Rs 1.17 crore, Shyam DRI is yet to clear Rs 63 lakhs and Bhusan Steel and Power is required to pay Rs 1 crore.