BackGovt seeks up to $2.2 billion dividend from Hindustan Zinc: report
The report says the government, which owns 29.5% of Hindustan Zinc, is pushing for a dividend of Rs10,000-15,000 crore, to be paid by 31 March
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New Delhi: India is seeking a dividend of up to $2.2 billion from partly state-owned Hindustan Zinc Ltd (HZL), three people with knowledge of the matter said, as New Delhi targets a boom in the base metal to help shore up crumbling public finances.
The government, which owns 29.5% of HZL, is pushing for a dividend of Rs10,000-15,000 crore ($1.47-2.20 billion), to be paid by 31 March, officials said, speaking on condition of anonymity.
Majority-owned by billionaire Anil Agarwal’s Vedanta Resources Plc, HZL is sitting on about Rs36,000 crore in surplus cash, they said, and would rather reward investors at least in part with a share buyback. At its latest share price, HZL’s market capitalisation was about Rs1.2 trillion, more than double its level this time last year.
The push comes as Prime Minister Narendra Modi’s shock move to outlaw high-value bank notes late last year has squeezed the country’s economy, straining finances at both government departments and state-run firms. On Monday, India’s oil minister said the government is seeking higher dividend payouts from cash-rich oil marketing companies.
“We are looking at their accumulated profit, and we have been preparing to fight," a senior government official said. Government representatives may raise the issue at an HZL board meeting next month, the official said. That debate could fuel frustration at Vedanta, which has long wanted to take full control of the business.
HZL did not respond to a Reuters e-mail seeking comment.
In the previous financial year, buoyed by strong demand for zinc, used in everything from pharmaceuticals to batteries, HZL paid shareholders a record dividend. The government earned as much as Rs5,000 crore from that payout, including the dividend distribution tax.
Between July and September, the company’s net profit stood at Rs1,902 crore, down about 15%. Analysts expect HZL to book a profit of about Rs7,600 crore in the current fiscal year.
But people directly involved in talks on the matter said that this year HZL is reluctant to pay shareholders a hefty dividend as it would attract a 20% tax payout. Instead, the company is keen to explore share buybacks.
However, a share buyback, reducing the government’s holding, could run up against an order by the country’s Supreme Court in January 2016, when the government was instructed not to reduce its stake in HZL without seeking parliamentary approval.
The government has also sought legal opinion on whether it would be allowed to dilute some of its holding in the company, the sources said. Reuters
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