The BIL board, which met here on Tuesday, approved the proposal under which BIL's shareholders would be issued one share of BZL for every five shares held in BIL, it said in a release here on Tuesday.

The share swap, based on the recommendations of a chartered accountant's firm, would result in 90 per cent of the new shares to be issued going to BIL and the remaining 10 per cent to its shareholders, it said.

With this, BIL would become a holding company of BZL, but the latter would have its own management set-up, even as the former would exercise overall control of all operating businesses of zinc, cement and glass fibre conducted by its subsidiaries, it added.

The main objective of hiving off zinc business was to improve profitability and shareholders' value of BIL, by adopting subsidiary route, it said.These cost-free flow of funds into BIL would enable it to diversify and expand activities through investment in new subsidiaries, it added.

The first phase of BIL's zinc expansion project costing Rs 325 crore, would be financed by sale of part of its equity holdings in subsidiaries, mainly Binani Cement Ltd, it said adding the balance would be raised in the form of loans from financial institutions.