Centre to cede HZL management control

New Delhi, Oct 14: The government has opted to cede management control in Hindustan Zinc Ltd (HZL) to a strategic partner, even as it offloads a minority 26 per cent stake in the zinc major who is slated for privatisation this fiscal.

“We have opted to cede management control in HZL to strategic partner, as this would increase the valuation of the company and enable the government to rake in more funds from the sale of equity,” highly placed official sources said.

This means that after the privatisation, the strategic partner would be entitled to nominate majority of nominees on the newly constituted board of directors, thereby controlling the decision making power.

Under the arrangement, the partner would be entitled to nominate up to six directors out of a total of 11.

The government would, however, retain the right to appoint the chairman, whereas the partner would be given the power to nominate the managing director.

The move comes after several rounds of discussions with bidders on the draft shareholders agreement (SHA) which was recently concluded.

A provision to the same has been incorporated in the draft SHA. The government has decided to divest up to 26 per cent stake in HZL to a strategic partner, thereby diluting its stake to 49 per cent.

It has mandated Banque Nationale De Paris-Paribas (BNP-Paribas) to act as global advisors.

Prior to this, government had opted to retain management control by reserving the right to nominate six directors and allowing the partner to nominate the remaining five.

Asked whether handing over management control to the minority partner would violate company laws, the source said that under the SHA, partners had a right to choose who would run the management without violating the laws in force.

As many as six bidders are in the fray for acquiring stake in HZL, including domestic majors Birla Copper and Sterlite Industries. International giants Metdist and Glencore are also in the fray.
Binani Zinc has tied up with Korea Zinc to bid for HZL and Bhushan Steel has opted to follow the solo route.

— PTI