Government is planning to oppose Hindustan Zinc's decision to purchase Vedanta's global zinc asset

Industry Outlook Team | Tuesday, 07 February 2023

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The Indian government intends to object to Hindustan Zinc Ltd.'s proposal to pay $2.98 billion for Vedanta Ltd.'s global zinc holdings. According to the people, who declined to be identified because the information is private, the government, which plans to sell its nearly 30% stake in Hindustan Zinc through an offer-for-sale mechanism, is likely to vote against the plan due to worries about everything from high valuations to the fact that it involves a related party. They added that the government is attempting to

persuade Hindustan Zinc to withdraw the proposal and claimed that the idea was forced through despite government officials' refusal to approve it. This would make it more difficult for billionaire Anil Agarwal to reduce debt at ultimate parent Vedanta Resources Ltd., which, according to data collated by Bloomberg, has bonds maturing in the next three and a half years worth $4.7 billion.

The purchase of THL Zinc Ltd.'s assets by Hindustan Zinc was reached last month. Over a period of 18 months, Mauritius gradually separated from its parent. THL's businesses include Skorpion Zinc (Pty) Ltd. in Namibia and Black Mountain Mining (Pty) Ltd. in South Africa. Earlier, CNBC-TV18 reported on the government's intention to oppose the purchase.

A representative for the finance ministry ignored calls and a text message requesting remarks, and neither Hindustan Zinc nor Vedanta responded to emails given to them. Analysts have warned that the expensive deal will deplete Hindustan Zinc's cash reserves, which Vedanta owns approximately 65% of. Regular dividend payments from the unit to the parent have assisted in increasing cash flow for Vedanta Resources.