Hindustan Zinc restructuring proposal may derail divestment plan, ET Infra - infrabuddy.com

Hindustan Zinc restructuring proposal may derail divestment plan, ET Infra

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A corporate restructuring plan initiated by the board of Hindustan Zinc Ltd (HZL) in September has cast a fresh shadow over the government’s bid to sell a part of its 29.54% stake in the miner through an offer for sale (OFS) this fiscal, said a person aware of the details.

Any delay in the stake sale process could dent the Centre’s disinvestment target of ₹51,000 crore for FY24.

Billionaire Anil Agarwal-controlled Vedanta Ltd holds 64.92% in HZL. At current prices, the government’s 29.54% stake in HZL is valued at ₹37,532 crore. Senior officials have already said the government intends to dilute its stake in HZL in tranches over a period of time, as its shareholding remains substantial.

This is the second time in about a year that the government’s plan to divest a portion of its stake in HZL through an OFS may run into delays.

The government doesn’t typically announce OFS timelines in advance to prevent market speculation or manipulation. However, the HZL OFS was widely expected by the December quarter of this fiscal.

In a meeting on September 29, the HZL board asked the company to explore creating separate legal entities for its three main businesses – zinc and lead, silver, and recycling – to unlock shareholder value. The board asked a committee of directors to evaluate the suggestions and recommend options and alternatives.

ET reported on November 17 that the mines ministry had written to HZL in October, making it clear that any such reorganisation would require government approval.

“The fresh uncertainties created by the board’s decision (in September) will impact the government’s OFS timeline for HZL. Investors want certainty,” the person cited above told ET. “Unless they are sure about the roadmap the company is going to implement and see the merit in it, they may not like to invest in the OFS.”

A final call on the OFS will be taken by the government based on the HZL board’s decision.

HZL has commissioned a study on creating separate entities. Once it is completed, the findings are expected to be shared with the board, including government nominees, for consideration.

  • Published On Nov 29, 2023 at 08:27 AM IST

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