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Government to exit Hindustan Zinc Ltd

Oct 17, 2023

By: BlinkX Research Team

The Indian government is preparing to sell its remaining interest in Hindustan Zinc Ltd. (HZL), a Vedanta subsidiary, in smaller increments over a longer period of time in an effort to increase its value. At the present market price, the residual stake is estimated to be worth around Rs 40,000 crore. Due to Vedanta's request for a related party transaction, the government's planned equity sale was postponed last year, which had a negative effect on investor sentiment.

Vedanta Ltd currently owns 64.92 percent of HZL. The government's 29.54 percent investment in HZL, India's largest zinc/lead miner, was classified as a public float when it was privatised in 2002-2003 in favour of Vedanta. After Vedanta failed in its attempt to obtain the government's remaining ownership in 2021, the Supreme Court permitted the government to sell the stock through open market transactions as a means of exit.

The OFS was postponed until January 2023 as a result of the HZL board's approval of a plan to buy Vedanta's global zinc holdings in a related-party transaction. The government objected to this action, citing Sebi rules requiring minority shareholders' consent for related-party transactions. In order to address liquidity concerns, HZL issued a special dividend last year. This generated almost Rs 9,000 crore for the government, helping to make up for the lack of disinvestment receipts.