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Sesa Gains Most in 8 Years on India Stake Sale Expectations

Sesa Goa Ltd., Sterlite Industries (India) Ltd. and Hindustan Zinc Ltd., controlled by billionaire Anil Agarwal, soared in Mumbai trading on optimism the Indian government will expedite its plan to sell stakes in Hindustan Zinc and Bharat Aluminium Co.

Sesa Goa, an iron ore miner, rose 16 percent to 151.10 rupees, the most since Sept. 19, 2005, at close of trade in Mumbai. Sterlite Industries (India) Ltd., the nation’s top copper producer, surged 9.8 percent to 83.10 rupees, the most since May 18, 2009. Hindustan Zinc, of which the government owns 29.5 percent, gained 13 percent to 119.20 rupees.

“The government is in need of money to cut its rising current account deficit so it appears there will be extra effort to push the stake sale through,” said Abhisar Jain, an analyst at Centrum Broking Pvt. in Mumbai. “Vedanta merged Sesa and Sterlite and the merged entity will benefit from the cash surplus that Hindustan Zinc has but hasn’t been able to utilize. It also stands to benefit if the sale were to take place via an open auction as valuations have fallen.”

Sterlite Finance Director Tarun Jain declined to comment. Sterlite owns 64.9 percent in Hindustan Zinc.

Vedanta Group offered 170 billion rupees ($2.7 billion) for the Indian government’s remaining stakes in Hindustan Zinc and Bharat Aluminium, Vishwapati Trivedi, the then secretary at the Ministry of Mines, said March 22 last year. Vedanta, in August last year, sought shareholder approval to raise by 15 percent its offer to buy the stake in Hindustan Zinc, which has cash and equivalents of $3.4 billion, according to Bloomberg-compiled data.

Sale Approval

Agarwal’s plan to buy stakes may falter as the government insists on parliament’s approval for the deal, three people familiar with the decision said Jan. 18.

The legal hurdles have been overcome and the stake sale in Hindustan Zinc may take place via an open auction, CNBC-TV18 channel reported, citing unidentified officials in India’s Finance Ministry.

Lack of full control at Hindustan Zinc has undermined decision-making at Vedanta. In 2010, Vedanta’s plan to buy Anglo American Plc’s Skorpion zinc mine in Namibia through Hindustan Zinc failed after the Indian government didn’t ratify the deal. Vedanta completed the purchase through Sterlite.

India’s current-account deficit widened to an unprecedented 4.8 percent of gross domestic product in the fiscal year ended March 31, while the pace of economic growth dropped to a decade-low 5 percent, according to official figures.

Sesa Goa on Aug. 17 said its merger with Sterlite has become effective. Trading in Sterlite shares will be suspended from Aug. 27, it said today in an exchange filing.

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