Government sale of Hind Zinc stakes pending clarification of proposed global asset transfer; could miss the revised disposal target

The sale of the government’s remaining 29.54 percent stake in Hindustan Zinc is likely only after Vedanta’s planned sale of global zinc assets to the former PSU is complete, according to an official.

With the government sales plans Hindustan Zinc In limbo the divestment is unlikely to happen by March and therefore could miss the revised sales target of Rs 50,000 crore for the current fiscal year.

So far in the current financial year the Government has raised Rs 31,107 crore from the sale of shares in CPSEs. It planned to sell its 29.54 percent stake in HZL to meet the revised target.

The sale of shares in HZL is likely only after there is clarity on whether the transfer of zinc assets abroad will take place and whether concerns from minority shareholders have been allayed, the official said.

“Investors ask us whether the transfer of foreign assets is taking place. We only want to sell shares if there is clarity on the matter. We don’t want to sell the stake in a rush,” the official added.

Since this is a related party transaction, it should be a non-cash asset transfer, the official said.

Last month the government said it would examine all legal options on matters related to the plans Anil Agarwal-promoted Vedanta to sell its global zinc assets to HZL.

The Ministry of Mines has asked Vedanta to explore other non-cash methods of acquiring these assets.

The valuation of the assets is among several concerns reported by the government.

Vedanta announced in January that it would sell its global zinc assets to HZL for $2,981 million in cash. Vedanta holds a 64.92 percent stake in HZL. Hindustan Zinc is an integrated producer of zinc, lead and silver.

The Government had sold its 26 per cent stake along with management control to Sterlite, part of Agarwal’s Vedanta Group, for Rs.40.5 per share in 2002 – giving Vedanta Group management control in HZL.

The Vedanta Group later bought a 20 percent stake from the market and a further 18.92 percent from the government in November 2003, increasing its stake in HZL to 64.92 percent.

The Cabinet Committee on Economic Affairs (CCEA) last year approved the sale of 124.79 billion shares, or 29.54 percent stake, that the government holds in the zinc producer.

At the current price of Rs 304.65 per share, the Government’s 29.54 per cent stake is valued at approximately Rs 37,000 crore.

The official said that since the public outstanding is only about 5 percent, it would not be feasible for large investors investing lump sums in the company due to limited stock availability in the market.

The government currently holds a 29.54 percent stake in HZL, while a 5.54 percent stake is held by public shareholders. Mining mogul Agarwal’s Vedanta Ltd is the promoter and holds a 64.92 percent stake in HZL.