BackHindustan Zinc divestment unlikely this fiscal
Mines ministry fears sale of residual stake in Hindustan Zinc may not go through due to lack of time to complete process
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New Delhi: The cabinet may have cleared it, but the mines ministry fears that the government’s sale of a residual stake in Hindustan Zinc Ltd (HZL) may not go through this financial year due to a lack of time to complete the process. The finance ministry hopes to garner ₹ 17,000 crore from the stake sale—money that will help it meet the fiscal deficit target of 4.8% of GDP for the current fiscal year.
“According to my experience, this (stake sale) should take more than three months," said a mines ministry official.
An official of the department of disinvestment, ministry of finance, agreed and said that it takes three months for “clear-cut cases where no ifs and buts are involved".
“With the kind of legal angle and controversies involved, this case is certainly not one of those," he added.
Neither official wanted to be identified.
Manish Sonthalia, senior vice-president and head of equities and portfolio management services at Motilal Oswal Financial Services Ltd, said he thinks the stake sale can go through since there is a ready buyer in Vedanta, the majority stake holder in HZL. “It is ready with the cash. You have still two months left which is good enough time. You can close the sale in 15 days. Unless there is any fresh legal hurdle, it is only about what method the government wants to follow for the stake sale."
Sonthalia said the stake is also crucial to achieve the set fiscal deficit target. “Otherwise it will be difficult to achieve the target," he added.
The cabinet committee on economic affairs approved the sale of government’s 29.5% residual stake in HZL through an open market auction on 20 January. HZL, a subsidiary of London-based Vedanta Reosurces Plc, is the world’s largest integrated producer of zinc. The government had sold its controlling stake in HZL to Vedanta chairman Anil Agarwal between 2001 and 2003.
In late December, the Central Bureau of Investigation registered a so-called preliminary enquiry against Agarwal and others over suspected irregularities in the divestment. The valuation of that sale has come under a cloud following allegations that the government’s valuer ignored some of the assets (mines) of the firm.
Subsequent to the 26% stake sale for ₹ 445 crore in 2002, the government in 2003 sold an additional 18.92% of HZL to Sterlite for ₹ 323.88 crore. Sterlite acquired another 20% through an open offer to public shareholders.
The government has so far received ₹ 3,000 crore from stake sales in seven state-controlled firms, including Power Grid Corp. of India Ltd, Hindustan Copper Ltd, National Fertilizers Ltd and MMTC Ltd, against its target of ₹ 40,000 crore.
“I would have been hopeful (of doing it this financial year) if it were ₹ 160 crore, but it’s not. It involves (around) ₹ 16,000 crore. It’s not going to be an easy process," added the mines ministry official.
Meanwhile, the government has formed an inter-ministerial committee chaired by the secretary of mines ministry to decide the valuation. The committee is yet to meet.
Asit Ranjan Mishra contributed to this story.
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