Vedanta-owned Hindustan Zinc has reached out to its largest minority shareholder, Mines Ministry, with a revised demerger proposal that it expects will “unlock shareholder value”. The Ministry though is prioritising “strategic stake offload” in the company, over going ahead with the proposed demerger.
The Mines Ministry holds 29.54 per cent in the integrated zinc and silver-maker with at least three government representatives on Board, while Vedanta owns the majority 64.92 per cent. Vedanta promoter Anil Agarwal’s daughter, Priya Agarwal Hebbar, heads Hindustan Zinc.
“There have been a series of letters. And Hindustan Zinc is trying to reach out to the Ministry with a revised demerger plan. The details are yet to be discussed. So far, we are yet to give time for the meeting,” an official in the know told businessline.
For any demerger proposal of the zinc-maker to go through, there needs to be a green-light from majority of the minority shareholders (in this case the Ministry).
Re-worked proposals
Incidentally, a re-worked proposal features creating two companies – zinc & lead, and the second one for silver.
Hindustan Zinc did not respond to queries from businessline .
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The initial demerger proposal - wherein Hindustan Zinc was to create three separate legal entities – one for zinc and lead, one for silver, and ultimately a third for the recycling business – and list them, was shot-down. Impact of investor confidence because of the demerger was seen as a major area of concern.
While rejecting this demerger proposal, it was also pointed out that the company was running “profitably as a single unit”. There was no guarantee that post demerger, different companies will continue to have a similar valuation or be equally profitable.
“Right now, the Ministry isn’t too keen to explore any demerger. Rather the focus is on disinvesting its stake,” a Ministry official said.
Market studies under-way
A second Mines Ministry official said that roadshows have been carried out last month (April) and the government was “keen to off-load its stake” at the “right time”. Markets continue to be volatile, because of which the offer for sale (OFS) has reportedly been held back.
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“We are studying the market. But right now, conditions remain volatile. So, an OFS should come at the right time which allows us maximum value. But we are carrying out roadshows to gauge investor interest and the market mood,” the official said.
A call is yet to be taken whether the entire stake is off-loaded at “one go” or be done via smaller tranches.