The logo of the Vedanta group has been installed on the façade of its headquarters in Mumbai. file | Photo Credit: Reuters
The government’s nominees on the Hindustan Zinc (HZL) board have strongly opposed its parent company Vedanta Ltd’s plan to buy overseas zinc assets for around $3 billion, with the Center flagging several concerns about the related-party transaction. including its rationale and evaluation, a top official told Hindu,
Although the objections and concerns of all three government directors in the nine-member HZL board at its January 19 meeting were overruled with the company announcing the board’s approval for the transaction, the government, which still held 29.5% in HZL stake, is not convinced and refuses to let the deal happen.
The deal includes an immediate cash consideration of $2.4 billion to Vedanta Ltd for the sale of THL Zinc Ltd, Mauritius with assets in Namibia and South Africa, with the remaining $0.58 billion to be paid at a later date. It also barred the pitch for the Centre’s plans to raise funds by selling its residual shares in the market.
“The directors of the government have opposed the deal as many aspects including valuation are not credible,” he said. It is not a ‘principle’ thing, but also about valuation, it is a related party. Vedanta is also listed and HZL is also its group company, so if these assets are good, they will be accretive for the group in their current structure as well,” the official explained.
In a post-board meeting with analysts, HZL’s top executives did not answer questions on whether government representatives had also approved the transaction. “When we say board approval, we do not see individually which director gave what opinion. But we can see overall, the board has approved it,” HZL CEO Arun Mishra Said.
HZL has indicated that it expects to complete the transaction, which still requires shareholder approval, in 18 months, with executives telling analysts that “some tax exemption type of things” would be required from the government. approval” required.
“How can the deal happen without the approval of the government? All three of our directors have opposed it and we will oppose it at the level of shareholders as well. Whether the value of the government stake goes up or down, the market must also be convinced of the need for this transaction – where no opportunity is being lost as the assets are only within the group,” said the official quoted earlier. “In Everything has to be closely examined,” he concluded.
Asked on an analysts’ call whether the government would be considered a ‘minority’ shareholder for the ‘Related Party Transaction’, the HZL CEO had said: ‘As of now, we have only got the board approval and will go ahead with the shareholder’s approval. Acceptance and we’ll look at it at that time. At present, we are not forming any opinion on such matters which are subject to legal opinion.
Shares of Hindustan Zinc, which were trading at ₹325 at the start of 2023, soared to ₹377 at the time of the board meeting on January 19. On Monday, the stock of HZL fell 2.1% to around ₹338.85 on BSE.