Govt to sell balance HZL stake in tranches | The Financial Express

Govt to sell balance HZL stake in tranches

The decision to sell the stake in tranches is in view of the “high value of the stake” and after an evaluation of the market’s capacity to respond to the OFS.

Govt to sell balance HZL stake in tranches
After the appointment of five bankers for the OFS, the department of investment and public asset management (Dipam) has now begun the process to appoint a legal adviser for the transactions.

The government will likely sell its residual 29.54% stake in the Vedanta-controlled Hindustan Zinc (HZL) in tranches, rather than in one go, an official source said, adding that bankers will begin road shows for the offer for sale (OFS) soon.

At current market prices, the Centre’s balance stake in the company, an integrated miner and producer of non-ferrous metals, including zinc, lead, silver and cadmium, is worth about Rs 36,000 crore.

The decision to sell the stake in tranches is in view of the “high value of the stake” and after an evaluation of the market’s capacity to respond to the OFS.

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The official, however, refused to comment on whether the entire stake will be offloaded in the current fiscal itself.

After the appointment of five bankers for the OFS, the department of investment and public asset management (Dipam) has now begun the process to appoint a legal adviser for the transactions.

In the third week of August, Dipam appointed five bankers — ICICI Securities, Axis Capital, Citi Group, HDFC Bank and IIFL Securities — to advise on the timing and management of the HZL stake sale.

Dipam has invited applications from reputed legal firms, which can submit proposals by September 16, to select an adviser for the transactions.

The share of HZL closed at Rs 287.55 on the BSE on Monday, up 0.77% from the previous close.

With not many big-ticket transactions in the immediate pipeline, the sale of the HZL stake is critical to boost the government’s non-debt capital receipts in FY23.

So far during the current financial year, Rs 24,544 crore, or 38% of the annual disinvestment target of Rs 65,000 crore, has been mopped up. The transactions that have been concluded include the initial public offer of LIC, a few offers for sale (OFS) and buyback of shares.

The government is looking at garnering more disinvestment receipts in the current financial year, as it tries to step up capex and meet additional subsidy costs totalling about Rs 2 trillion.

As per a Supreme Court order dated November 18, 2021, the Centre can sell its residual stake in HZL in the open market under Sebi rules.

Recently, the Centre and Vedanta, the promoter of HZL, had mutually decided to end an arbitration concerning the second call option demanded by Vedanta in the residual stake sale.

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In 2002, Vedanta (earlier known as Sesa Sterlite) 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%.

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