Valuation of the assets is among several concerns flagged by the government, which holds a 29.54% stake in HZL that was privatised more than two decades ago. Officials said the proposed deal could affect Hindustan Zinc’s share price and upset the government’s plan to meet its divestment targets by selling a part of its stake through a public offer.
The government stake is worth nearly ₹42,300 crore at HZL’s Monday stock price on the BSE, where it closed 2.1% lower at ₹338.85. “There are many problems with the deal,” a senior official told ET.
‘Government board representative raised objections’
“First, it was done at a valuation which is questionable; this will put pressure on Hindustan Zinc,” said the senior official, adding that it will erode HZL’s valuation in a market that is already volatile and have an adverse impact on the divestment target.
The official said the deal had been proposed by ignoring minority shareholders, as the government representative on the HZL board had raised objections to the plan.
Vedanta did not respond to the email query sent by ET.
Disinvestment link
The government has lowered its divestment target for this fiscal year from the initially proposed Rs 65,000 crore to Rs 50,000 crore. So far, it has achieved only Rs 31,107 crore and has been counting on the HZL stake sale to meet the target by end of March.
Several brokerages said the acquisition would give Hindustan Zinc access to rich resources, but that the valuation was high and would impact the company’s stock price.
“While Hindustan Zinc’s earnings shall remain firm, the takeover of Zinc International at an expensive valuation would wipe out cash,” Nuvama Institutional Equities said in a note last month, while cutting its target price on the HZL stock to Rs 276, from Rs 292.
On January 20, HZL’s board approved the acquisition of THL Zinc Ltd, Mauritius, which holds London-based Vedanta Resources’ zinc assets in South Africa and Namibia. “This investment is an attractive opportunity for Hindustan Zinc to grow, increase its foothold overseas and take its brand global,” the company had said in a news release.
