Hindustan Zinc: Vedanta, govt agree to end arbitration

The Union government and Vedanta have decided to end an ongoing arbitration concerning the second call option given to the latter to buy the Centre’s residual 29.5% stake in Hindustan Zinc (HZL), paving the way for the government to disinvest the stake, worth over Rs 39,000 crore, in the open market.

Both the parties have filed applications separately for ending the arbitration.

A senior official said the government would sell the balance stake in the company “at an opportune time”.

The Supreme Court (SC) had on November 18, 2021 allowed the Centre to disinvest its residual stake in HZL in the open market, citing that HZL had long ceased to be a government company.

In 2002, Vedanta (earlier known as Sesa Sterlite) had bought a 26% stake in HZL, India’s largest zinc/lead miner. It exercised the first call option in 2003 and acquired an 18.9% additional stake in HZL. Vedanta later acquired another 20% stake in the company through an open offer, increasing its shareholding to 64.92%.

To acquire the government’s remaining 29.5% share in HZL, it had exercised the second call option in 2009, but this was rejected by the government. Following this, Vedanta initiated arbitration proceedings against the government in the same year.

On Tuesday, the HZL stock closed at Rs 315.25, up 0.4% from the previous closing price, on the BSE. At current market prices, the Centre’s 29.54% stake in the company is worth Rs 39,348 crore. “We have to first get out of the arbitral tribunal. At an appropriate time, we will decide on when and how the disinvestment will be done in the company,” the official cited above said.

While the previous UPA government had approved a stake sale in HZL in January 2014, the employee association approached the SC seeking a CBI probe into the alleged irregularities in HZL’s stake sale to Vedanta in 2002. The controversy is not yet over. On February 7, the SC rejected the Centre’s plea for recall of its earlier direction that asked the CBI to register a regular case concerning 26% divestment in HZL in 2002. However, the apex court allowed the government to pursue legal remedy, including the filing of a review petition.

The government has set a modest disinvestment target of Rs 65,000 crore for FY23, nearly 60% of which could be met from the sale of residual stake in HZL alone, if the government decides so. The government also has a strong pipeline of strategic disinvestment next year, including fuel refiner-cum-retailer BPCL and IDBI Bank. The government’s 52.98% stake in BPCL is worth about Rs 42,300 crore at current market prices, while its 45.48% stake in IDBI Bank is worth about Rs 23,000 crore.