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News flows stating the Government of India asking Sterlite to
submit fresh proposals to buy-back the 49% stake it holds in
Balco
n There is a high possibility of the deal getting concluded
during FY12 itself as Sterlite has long been pursuing the same
and Govt currently expoloring all options of raising money
n Balco’s stake sale would give Govt about Rs 15bn during
FY12 itself. Not likely to materia lly impact Sterlite financials.
n Balco buyout could pave the way HZL divestment giving Govt
over Rs 150 at current valuations and Sterlite access to
complete control over all subsidiaries
What would the buyout entail?
¡ This would give the Govt anywhere around Rs 15bn and Sterlite complete control
over Balco. This would not have any material impact on Sterlite’s financials.
¡ There are presently three Govt nominees on the Balco Board. Buyout would realign
the it’s composition and give Sterlite and Vedanta Resources (parent co of Sterlite)
an edge to restructure their aluminium and power businesses.
¡ Sterlite also has 30% stake in Vedanta Aluminium (Balance 70% held by Vedanta)
and the deal could bring about synergy between Balco & Vedanta Aluminium
operations
¡ Further this could also pave the way for buyout of the Govt’s 29.5% stake in HZL.
(HZL has Market capitalization of 520bn, Sterlite holds 65% of it)
Valuation
¡ Balco currently operates 245 ktpa of Aluminum, 810 MW of captive power. It is also
in the process of commissioning 1200 MW (300 X4) of power and 325ktpa of
smelter.
¡ At current capacity Balco generates EBITDA of about Rs 10 bn per annum. Giving a
multiple of 5X and adjusting for net debt of Rs 22bn as of 31st March 2011 the
current equity value of Balco comes at Rs 28bn
¡ We currently have a target price of Rs 162 for Sterlite. The contribution on account
of Balco’s 51% stake is just Rs 4 (Valuation in Sterlite essentially comes from HZL,
Zinc overseas operations, Sterlite Copper operations in India & Sterlite Power)
We believe the buyout would address the uncertainties surrounding this aspect, fetch
the government much needed revenue and give Sterlite and edge to bring about further
synergies across its different operations.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
News flows stating the Government of India asking Sterlite to
submit fresh proposals to buy-back the 49% stake it holds in
Balco
n There is a high possibility of the deal getting concluded
during FY12 itself as Sterlite has long been pursuing the same
and Govt currently expoloring all options of raising money
n Balco’s stake sale would give Govt about Rs 15bn during
FY12 itself. Not likely to materia lly impact Sterlite financials.
n Balco buyout could pave the way HZL divestment giving Govt
over Rs 150 at current valuations and Sterlite access to
complete control over all subsidiaries
What would the buyout entail?
¡ This would give the Govt anywhere around Rs 15bn and Sterlite complete control
over Balco. This would not have any material impact on Sterlite’s financials.
¡ There are presently three Govt nominees on the Balco Board. Buyout would realign
the it’s composition and give Sterlite and Vedanta Resources (parent co of Sterlite)
an edge to restructure their aluminium and power businesses.
¡ Sterlite also has 30% stake in Vedanta Aluminium (Balance 70% held by Vedanta)
and the deal could bring about synergy between Balco & Vedanta Aluminium
operations
¡ Further this could also pave the way for buyout of the Govt’s 29.5% stake in HZL.
(HZL has Market capitalization of 520bn, Sterlite holds 65% of it)
Valuation
¡ Balco currently operates 245 ktpa of Aluminum, 810 MW of captive power. It is also
in the process of commissioning 1200 MW (300 X4) of power and 325ktpa of
smelter.
¡ At current capacity Balco generates EBITDA of about Rs 10 bn per annum. Giving a
multiple of 5X and adjusting for net debt of Rs 22bn as of 31st March 2011 the
current equity value of Balco comes at Rs 28bn
¡ We currently have a target price of Rs 162 for Sterlite. The contribution on account
of Balco’s 51% stake is just Rs 4 (Valuation in Sterlite essentially comes from HZL,
Zinc overseas operations, Sterlite Copper operations in India & Sterlite Power)
We believe the buyout would address the uncertainties surrounding this aspect, fetch
the government much needed revenue and give Sterlite and edge to bring about further
synergies across its different operations.
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