Govt against HZL’s plan to buy Vedanta’s global zinc assets
2 min read . Updated: 07 Feb 2023, 07:16 AM IST
Premium- Govt feels decision against minority rights; move to be a big negative for Vedanta Ltd
- The government had never supported this deal and their nominees on the board of HZL had opposed this acquisition
New Delhi: The ministry of mines will oppose Hindustan Zinc Ltd’s (HZL) plans to purchase Vedanta Resources global zinc assets for $2.98 billion, a government official told Mint.
Confirming the move, the government official said that Vedanta’s decision is against minority shareholder rights. Hindustan Zinc is owned by Vedanta Ltd, which owns 64.9%, and the government of India owns 29.5%.
The government opposition to the deal would stall the sale and delay the whole process that would be a big negative for Vedanta Ltd, which had expected this transaction to unlock value, monetize international zinc assets, and create significant synergies between HZL and Vedanta Ltd.
A company spokesperson, when contacted, did not comment on the opposition by the government.
Anil Agarwal-led Vedanta Ltd on 19 January informed that the company will sell its Zinc International assets to Hindustan Zinc Ltd after its board of directors approved the sale of its Zinc International assets held by THL Zinc Ventures Ltd (Mauritius), wholly owned subsidiary of Vedanta, through THL Zinc Ltd (Mauritius). THL Zinc Ltd will become a wholly-owned subsidiary of Hindustan Zinc.
Zinc International has mining assets in South Africa and Namibia with a total reserves and resources of about 35 million tonne which HZL will be acquiring for cash consideration of not more than $2.98 billion. Mint had earlier reported that analysts believe the acquisition provides HZL the opportunity to increase its mining asset portfolio as not many zinc mines are available for auction in India and there is limited upside potential for production from current mining assets.
HZL would have been able to increase capacity from 1.2 MT to 2 MT plus, as well as gain access to countries in Africa, Europe, and North America. Analysts, however, are concerned about the deal’s valuation.
Sources added that the government had never supported this deal and their nominees on the board of HZL had opposed this acquisition. The company’s board has nine members, including the chairman and CEO of the company, and three government nominated directors.
Post this report, Vedanta Ltd’s stock fell by 2.56% on the BSE and closed at ₹306.25 a piece. Hindustan Zinc Ltd also fell by 2.11% on the bourses and closed at ₹338.35 a share in a market that fell by 0.55% to close at 60506.90 points.
“The assets have significant growth potential, given rich resources; however, we find the acquisition expensive on current earnings, as growth optionality has high execution risk," said analysts at Kotak Institutional Equities.
On January 20, the board considered and approved the proposed sale of its Zinc International assets held by THL Zinc Ventures Ltd (Mauritius) (“THLZV"), a direct wholly owned subsidiary of the Company, through THL Zinc Ltd (Mauritius) (“THLZ") comprising shares held in Black Mountain Mining Pty Ltd, South Africa (69.6%) and THL Zinc Namibia Holdings (Pty) Ltd (100%), Namibia, to the proposed wholly owned subsidiary (“SPV") of Hindustan Zinc Limited (“HZL") another listed subsidiary of the Company, for a cash consideration not exceeding USD 2,981 million (in a phased manner basis agreed milestones), such that THLZ becomes a wholly owned subsidiary of the SPV.," Vedanta had said in its regulatory filing.
Post this report, Vedanta Ltd’s stock fell by 2.56% on the BSE and closed at ₹306.25 a piece. Hindustan Zinc Ltd also fell by 2.11% on the bourses and closed at ₹338.35 a share in a market that fell by 0.55% to close at 60,506.90 points.
