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Sterlite out of race for Hindustan Zinc

Indian metals firm Sterlite Industries has been knocked out of the race for a stake in Hindustan Zinc but consumer durables group BPL can bid for telecom firm VSNL under new divestment rules announced on Friday.

Under the rules, no company barred from raising funds from the capital market can bid for a state company needing a large cash infusion. This rule would not apply to a firm seeking to buy a state company that did not require a large sum of money.

In April, Sterlite was barred from raising funds from the market for two years and BPL for four years after being named by stock market regulator Securities and Exchange Board of India in an alleged share-rigging scandal.

"Sterlite goes out of (the race for) Hindustan Zinc....They are the same company against whom SEBI has passed the order," Divestment Minister Arun Shourie told reporters.

But "BPL can bid (for Videsh Sanchar Nigam Ltd)", he added. He said the BPL Innovision group which bid for a stake in VSNL was a different entity from the firm against which Sebi imposed penalties.

He made the statement after a meeting of the privatisation panel which set new eligibility rules for companies bidding for state firms. India's divestment ministry began drafting new guidelines after controversy earlier this year about the track records of certain companies bidding for state-owned firms.

The government, which owns 75.92 per cent of Hindustan Zinc, invited proposals from strategic partners last December to buy a 26 per cent stake in the company as part of its decade-old drive to privatise state-run companies.

The decision on Sterlite will leave seven firms including Indo-Gulf Fertilisers and Swiss-based commodities group Glencore which have shown interest in buying a stake in HZL.

The government is planning to lower its stake in VSNL, India's monopoly overseas telecom carrier, to 26 percent from 52.97 per cent by selling 25 per cent to a strategic partner and another 1.97 per cent to VSNL's employees.

The firm, one of India's most cash-rich, got six suitors in April when preliminary bidding closed, including three of India's biggest conglomerates, the Tata, Birla and Reliance groups.

Disqualified if convicted

Shourie said the new guidelines would apply to both bidders and advisers to the government for stake sales in state-owned firms.

"Any conviction by a court of law or indictment or adverse order by a regulatory body for a grave offence which casts a doubt on the ability of the bidder to manage the public sector undertaking once it is disinvested would constitute a disqualification," Shourie said. A "grave offence" was one that "outrages the moral sense of a community", he said.

He said investment bankers who advised the government on the sale of state-run firms will need to certify if they had been indicted for any offences.

In April, Sebi barred the Indian unit of securities firm, Credit Suisse First Boston from accepting new business until further notice over alleged involvement in manipulation of domestic share prices.

CSFB had been appointed advisers to the government for the stake of VSNL.

Shourie said CSFB's case had been referred to a committee of secretaries to apply the guidelines and take a decision.

India has said it plans to raise Rs 120 billion through the sale of stakes in at least 27 state-run firms in the year to March 2002.

But it has consistently failed to meet targets in the past due to several setbacks including opposition from labour unions and political parties.

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