With promoter Vedanta’s recent offer for sale (OFS) testing the market appetite for Hindustan Zinc Ltd (HZL), the government is exploring diluting a small portion of its residual stake of 29.54% in the current financial year via the same route.
Vedanta fell short of meeting its initially targeted proceeds from an offer for sale (OFS) of up to 3.17% in HZL (1.22% base offer size and option to retain oversubscription to the extent of 1.95%) during August 16-19. However, it managed to sell around s stake of 1.51% only to raise around Rs 3,100 crore compared with the target of up to Rs 6,500 crore, by selling up to 3.17%.
“We will also explore for a small tranche in the current financial year,” an official told FE, adding that Vedanta’s OFS in HZL has validated the Department of Investment and Public Asset Management’s view that the government stake sale in the company should be in small tranches.
Currently, Vedanta Ltd owns 63.41% of HZL. After India’s largest zinc/lead miner, was privatised in 2002-2003 in favour of Vedanta, the Centre’s 29.54% was categorised as the public holding. After Vedanta lost the case to acquire the residual stake from the government in 2021, the Supreme Court permitted the government to exit by offloading the stake through public offers.
The government’s stake in HZL is worth about Rs 62,000 crore at the current market prices. While the timing will be subject to market conditions, the government stake sale in HZL may be in small tranches of around 1.5%. The share price of HZL closed at Rs 496.55 on the BSE on Friday, up 1.42% from the previous closing.
So, the government’s exit from HZL will be a long haul as it has to find buyers for gradual stake sales in several years.
A planned stake sale by the Centre in the company was abandoned in FY23 due to promoter Vedanta’s plan of a related party transaction that spooked the investor sentiment.
So far in the current financial year, the government has mobilised Rs 3,160 crore in disinvestment receipts, largely from the OFS in GIC Re.
The Centre has set a target of Rs 50,000 crore in miscellaneous capital receipts (from disinvestment and asset monetisation receipts) in FY25, doing away with setting separate disinvestment targets.