Rs 15, 000cr dividend row: Anil Agarwal’s Vedanta makes counter offer to Narendra Modi govt, says will buy back Hindustan Zinc shares

By: | Updated: January 19, 2017 7:09 AM

Govt has sought `15,000-cr dividend from Hind Zinc

vedanta-reuThe Centre could raise about Rs 2,200 crore from the buyback, the total size of which is pegged at Rs 7,477 crore, or about 20% of the company’s paid-up capital and free reserves. (Reuters)

After the government sought a whopping Rs 15,000 crore as dividend in 2016-17 from the cash-rich Hindustan Zinc (HZL) in which it has 29.5% stake, billionaire Anil Agarwal-led Vedanta Resources — the majority owner in the company with management control — has suggested that, instead, the company could buy back a portion of its own shares.

The Centre could raise about Rs 2,200 crore from the buyback, the total size of which is pegged at Rs 7,477 crore, or about 20% of the company’s paid-up capital and free reserves. Mines secretary Balvinder Kumar, however, told FE that the company is yet to respond, though over a month has gone by since the dividend request was made by the mines ministry “orally”. “The company is yet to respond. However, they have promised us to look into the matter. A discussion on this might happen during the next board meeting of the company,” Kumar said.

The company reported Rs 1,902-crore net profit in the July-September quarter of the current fiscal. For the April-September period, its net profit had stood at Rs 2,939 crore. HZL’s total net profit for the entire 2015-16 fiscal was Rs 8,167 crore. As on September 30, 2016, HZL’s net cash and cash equivalents was to the tune of Rs 25,166 crore. A lion’s share of the reserves has been invested in mutual funds.

Contending that HZL’s modest dividend payment policy was instrumental for the accumulation of huge free reserves for HZL, the mines ministry had asked the management to declare special dividend for 2014-15. But the company was not in favour, saying that since payment of higher dividend would attract 20% dividend distribution tax, they would prefer to buy back the shares.

However, the management was told that the share buyback, through which the government too could have raised about Rs 2,200 crore, may not be possible in view of the January 2016 orders of the Supreme Court that the Centre can’t further dilute its holding in the company without amending the Metal Corporation (Nationalisation and Miscellaneous Provisions) Act, 1976, under which HZL was created.

Meanwhile, including a special golden jubilee dividend of 1,200% (Rs 24 per share of Rs 2), HZL had paid a record 1,390% dividend in 2015-16 with outflow including DDT of Rs 14,137 crore. In October, 2016, the company had announced an interim dividend of 95% (Rs 1.9 per share of Rs 2) for the year 2016-17.

HZL, the Rajasthan-based producer of zinc, lead, silver and cadmium, was incorporated as a PSU in 1966 on nationalisation of the erstwhile Metal Corporation of India. The divestment was carried out in 2002. Vedanta holds 64.92% stake and the remaining is held by institutional investors, private corporate bodies and the general public.

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