Business

Government opposes Vedanta move to sell zinc assets



NEW DELHI: In a setback to billionaire Anil Agarwal’s mining group, the government has opposed Vedanta Ltd‘s proposal to sell its international zinc business to Hindustan Zinc Ltd for $2.98 billion over concerns of valuation.
The government has threatened to take legal action to stop the sale of the Africa-based assets to HZL, in which it holds a 29.54 per cent stake.
In a letter to HZL, posted by the company to stock exchanges, the Ministry of Mines said the deal is a “related party transaction” and the government would “like to reiterate” its dissent.
HZL in January agreed to buy THL Zinc Ltd Mauritius from its parent, Vedanta Ltd, for $2.98 billion in phases over 18 months.
Vedanta holds a 64.92 per cent equity share of Hindustan Zinc ltd (HZL), which is an integrated producer of zinc, lead and silver.
HZL in a separate filing said it would place the ministry’s letter before the board and that a meeting of the shareholders to approve the deal was yet to be called.
The Rajasthan-based company has long been a cash cow for Agarwal’s Vedanta group, squeezing out rich dividends. The latest proposed transaction is being seen as another way of extracting more funds out of HZL.
The ministry in the letter said it is writing on behalf of the government on the resolution approved by the HZL board in its meeting on January 19 “for the creation of a wholly-owned overseas subsidiary of the company, funding such subsidiary to the extent of USD 2.981 billion and such subsidiary acquiring the shares of THL Zinc Ltd from THL Zinc Ventures Ltd (an entity of the Vedanta Group).”
It said its nominee directors on the board had recorded their dissent to the proposal.
“The proposed resolutions which envisage the acquisition of THL Zinc (a Vedanta company) by HZL (also a Vedanta company) thus being a related party transaction, we, the government of India would like to reiterate our dissent on the matter and the resolutions forming part of the agenda matter,” it said.
It wanted the company to explore other cashless methods of acquisition of assets.
The government, it said, would continue to oppose the transaction and “will explore all legal avenues available. The company is requested to not take any further action in relation to such resolutions”.
Earlier this month, S&P Global Ratings had stated that Vedanta Resources Ltd‘s (the parent company of Vedanta Ltd) credit ratings may “come under pressure” if it is unable to raise $2 billion and/or sell its international zinc assets.
Last week, Vedanta Resources stated that it had slashed net debt by $2 billion in the last 11 months, to $7.7 billion.
HZL CEO Arun Misra had said last week that the company is planning to get in touch with the mines ministry to resolve the differences over the acquisition of overseas assets of holding company Vedanta Ltd.


#Government #opposes #Vedanta #move #sell #zinc #assets

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button