The Centre will shortly begin the process to hire merchant bankers to advise and manage the disinvestment of its 29.54% residual stake in Hindustan Zinc Ltd (HZL) in tranches, sources told FE. “The entire process will begin now to appoint advisors,” a senior official told FE.
On May 25, the Cabinet had given its nod for the sale of the Centre’s stake in Vedanta-controlled HZL, a move that will boost the government’s non-tax receipts in FY23.
At current market prices, the stake is worth about 32,000 crore. The government will sell the stake in tranches keeping in mind the market’s absorption capacity and realising maximum value. Vedanta could bid for a 5% stake when the government sells its residual stake in HZL, the company’s chairman, Anil Agarwal, had said recently. With the privatisation of BPCL now on the back burner, the sale of HZL is one of the few big-ticket stake sales the government will rely on in this fiscal year to boost its non-debt capital receipts.
According to the Supreme Court order dated November 18, 2021, the Centre can sell its residual stake in HZL in the open market as per the Sebi rules. Recently, the Centre and Vedanta, the promoter of HZL, have mutually decided to end an arbitration concerning the second call option demanded by Vedanta in the residual stake sale. 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%.
The government is scouting for additional revenues as extra expenditure over the budget estimate is seen at about 2 trillion. There is an expectation that the disinvestment target of 65,000 crore will be exceeded by around 20,500 crore, given the receipts from LIC IPO, which was not budgeted. Besides HZL, topping the government’s disinvestment agenda is strategic disinvestment of IDBI Bank and Container Corporation in this fiscal.