The Union Cabinet on Wednesday gave in-principle approval for divesting the stake of the central government in Hindustan Zinc, sources told News18.com. The government is planning to offload entire 29.5 per cent residuary stake in the company. The offer size of divestment would be decided closer to the transaction, according to reports.
Hindustan Zinc stake is valued at Rs 39,385.66 crore, as of Wednesday, May 25. Following the news, the stock of Hindustan Zinc surged 6.81 per cent to Rs 315.90.
In November 2021, the Supreme Court had cleared the divestment in Hindustan Zinc. The metal producer ceased to be a government company as the government, an ordinary shareholder, has a 29.5 percent residuary stake.
The government was entitled to make a decision on divestment shareholding as long as the process was transparent and realised the best price, the top court mentioned.
Hindustan Zinc is one of the largest integrated producers of zinc and lead in India. It is also only integrated producer of zinc-lead and silver in the country.
Incorporated in 1996, Hindustan Zinc was a majority government-owned company. In 2002, the government sold 26 per cent of its equity in the company through a strategic sale to Vedanta. Right after the initial stake purchase, Anil Agarwal-led multinational mining-to-metals conglomerate acquired 20 per cent in the firm from the open market through mandatory open offer. Then in August 2003, Vedanta group bought 18.92 per cent stake in Hindustan Zinc. Vedanta now holds 64.92 per cent in the lead metal producer.
Anil Agarwal, founder and chairman of Vedanta Resources Limited to CNBC-TV18 that Vedanta can’t buy more than an additional 5 per cent stake in in the company of the 26 per cent.
The delay in the strategic sale of Pawan Hans, Shipping Corporation of India (SCI), IDBI Bank, and Bharat Petroleum Corporation Ltd (BPCL), and the scaled-down public offer of Life Insurance Corporation (LIC) of India have forced the government to consider other options.
The government has significantly cut its divestment target for the financial year 2023 at Rs 65,000 crore. The divestment target for FY22 has also been reduced to Rs 78,000 crore from the initial projection of Rs 1.75 lakh crore mentioned in the Union Budget 2022. The public offer of Life Insurance Corporation of India (LIC) raised Rs 20,560 crore this month.
Hindustan Zinc Ltd reported an 18 per cent year-on-year (YoY) jump in net profit at Rs 2,928 crore for the fourth quarter ended March 31, 2022, driven by higher volumes and higher metal prices. Net profit for the full year was Rs 9,629 crore, up 20.7 per cent year-on-year. Total revenues for the quarter rose 26.6 per cent YoY to Rs 8,797 crore from Rs 6,947 crore in the year-ago quarter. The revenue for the full year was Rs 29,440 crore, an increase of 30.1 per cent YoY.
Hindustan Zinc stock to remain under pressure in the future given the overhang of a large stake sale, analysts mentioned.
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