BALCO: The Disinvestment Story

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

Case Details:			Price:
Case Code	:	BECG004	For delivery in electronic format: Rs. 300; For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges Themes Corporate Restructuring
Case Length	:	10 Pages
Period	:	2001
Pub. Date	:	2002
Teaching Note	:	Available
Organization	:	BALCO
Industry	:	Metals & Mining
Countries	:	India

Abstract:

The case study looks at the issues relating to the disinvestment of Bharat Aluminum Company (BALCO) by the Government of India (GOI). It discusses the incidents, which surfaced after the GOI's decision to reduce its stake in BALCO to 49% and sell the majority holding to Sterlite Industries. In February 2001, when GOI announced the dis-investment deal of BALCO, hell broke loose. The opposition parties vehemently opposed the move and accused the government of selling BALCO for a price, which was far below its actual value. There was also stiff resistance from Government of Chhatisgarh, as well as the workers of BALCO who went on a strike opposing the deal.

The deadlock ended with the strike being called off after 62 days when the new management of BALCO finally brokered a deal with the workers. The case examines in detail the repercussion of the GOI's decision to dis-invest BALCO. The case throws light on the political squabbling over the issue and also takes through the workers strike over the issue. The case is designed to stimulate the students to think about the problems which crop up in the dis-investment of public sector undertaking faced by both parties to the deal and Government and the private party, with specific emphasis on the BALCO deal.

Issues:

» A general understanding of the problems associated with disinvestment.
» The political and other problems faced by the government.
» The problems faced by the private party and how to manage them.
» The ethical issues relating to sale of BALCO to a private party.