Indian government to sell almost 30% stake in HZL in tranches

The government will likely sell its residual 29.54% stake in the Vedanta-controlled Hindustan Zinc (HZL) in tranches, rather than in one go. 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.

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.

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.

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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