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Half of Nalco's equity to be converted into loan: govt seeks to improve EPS for divestment

The Union Cabinet today cleared a proposal to convert 50 per cent of the Rs 12.88 billion equity of the profit-making public sector company National Aluminium Limited -- NALCO -- into a loan.

After restructuring of the equity, NALCO's equity capital would stand reduced at Rs 6.44 billion, Information and Broadcasting Minister Pramod Mahajan said in New Delhi after a Cabinet meeting.

He said the loan would carry an interest of 14.5 per cent and there will be no moratorium on the interest. The loan can be transferred to financial institutions and banks.

NALCO's earning per share is much lower because of high equity. The government is finding it difficult to disinvest its shares because of the low EPS. This step will increase the EPS of the company substantially. It was less than Rs 3.50 in the previous financial year.

It is expected the loan of Rs 6.44 billion would fetch around Rs 5.75 billion to the government, which will be sold through SBI Capital Markets in the market.

UNI

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