The logo of Vedanta group installed on the facade of its headquarters in Mumbai. File
| Photo Credit: Reuters
Government nominees on the Hindustan Zinc (HZL) board have strongly opposed plans to purchase the overseas zinc assets of its parent company Vedanta Limited for almost $3 billion, with the Centre flagging several concerns about this related-party transaction, including its rationale and valuations, a top official told The Hindu.
Although objections and concerns of all three government directors in the nine-member HZL board at a January 19 meeting were overridden with the company announcing the board’s nod for the transaction, the government, which still has a 29.5% stake in HZL is not convinced and disinclined to let the deal go through.
The deal entails an immediate cash consideration of $2.4 billion to Vedanta Limited for the sale of THL Zinc Ltd., Mauritius, with assets in Namibia and South Africa, with the balance $0.58 billion being paid later. This also queers the pitch for the Centre’s plans to raise funds from selling its residual shares in the market.
“The government’s directors have opposed the deal as several aspects of this, including the valuations are not convincing. It is not an ‘in-principle’ thing, but also about valuations, it’s a related party. Vedanta is also listed and HZL is also its group company, so if these assets are good, they will accrue to the group in their current structure too,” the official explained.
At an earnings call with analysts after the board meet, HZL top brass parried queries on whether government nominees had also approved the transaction. “When we say Board approval, we don’t see individually which director opined what. But we can see overall, the Board has approved it,” Arun Misra, HZL CEO said.
HZL has indicated it hopes to complete the transaction that still needs shareholder approval, in 18 months, with officials telling analysts that “certain approvals” are required from the government for “certain tax exemptions kind of thing”.
“How can the deal go through without government approvals? All three of our directors have opposed it and we will also oppose it at the shareholders’ level as well. Whether the government stake’s value goes up or down, the market should also be convinced about the need for this transaction – where there is no opportunity getting lost as the assets are within the group only,” said the official quoted earlier. “All these things have to be examined closely,” he concluded.
Asked at the analysts’ call whether the government will be considered as ‘minority’ shareholder for what is a ‘related party transaction’, the HZL CEO had said: ‘As of now, we have only got the Board approval and we will go for shareholder’s approval and we will see it at that point of time. As of now, we are not making any opinion on such things, which are subject to legal opinion.”
The shares of Hindustan Zinc, which were trading at ₹325 at the beginning of 2023, had surged to ₹377 on January 19 when the board met. On Monday, the HZL stock fell 2.1% to about ₹338.85 on the BSE.
For all the latest business News Click Here
