Govt Will Sell Its Entire Stake In Hindustan Zinc Limited: 29.5% Stake Can Be Worth Rs 38,000 Crore?

The Cabinet Committee on Economic Affairs (CCEA) has given the go ahead for the government to sell its entire stake in Hindustan Zinc Limited (HZL).

Parent firm Vedanta Ltd holds 64.92 percent stake in Hindustan Zinc, while the government holds 29.5 percent.

Reportedly, the offer size of the divestment will be decided closer to the transaction.

Received Approval Last Year

The government expects the process to be completed by September.

In November 2021, the Supreme Court had allowed the government to divest its shareholding of 29.5 percent in Hindustan Zinc representing over 124.96 crore shares.

The top court said that the government was entitled to make a decision on divestment shareholding as long as the process was transparent and realised the best price.

Valuation

At current market price that stake is valued at around Rs 38,000 crore.

Analysts say that since this is going to be a market sale it will be difficult to sell such a large stake at one go.

So, it is likely that the government will sell at periodic intervals.

The Centre will benefit from this push to its disinvestment drive in the current fiscal.

Disinvestment Target

It has budgeted Rs 65,000 crore from PSU disinvestment and strategic sale, the second reduction after the initial projection of Rs 1.75 lakh crore was whittled down to Rs 78,000 crore.

Led by mining magnate Anil Agarwal, Vedanta recently said that it can buy just a 5 percent additional stake in HZL considering the price of the shares on offer with the remaining going to the market.

The government may have had to turn to HZL due to a scarcity of options due to the delay in the strategic sale of Pawan Hans, Shipping Corporation of India (SCI), IDBI Bank, and Bharat Petroleum Corporation Ltd (BPCL).

Company History

Hindustan Zinc, one of the largest integrated producers of zinc and lead in India was a government-owned company till 2002.

It is also the only integrated producer of zinc-lead and silver in the country.

In April 2002, the government offloaded a 26 percent stake to Sterlite Opportunities and Ventures for Rs 445 crore, thereby giving management control to Vedanta Group.

Vedanta Group later bought 20 percent from the market and another 18.92 percent from the government in November 2003, raising its ownership in Hindustan Zinc to 64.92 percent.