Prime Highlights
- Vedanta to offload a maximum of 10% stake in its holding in Hindustan Zinc, raising approximately ₹7,500 crore.
- The move is to support debt reduction and finance Hindustan Zinc’s ₹12,000 crore Debari expansion.
Key Facts
- Vedanta holds 63.42% of Hindustan Zinc and intends to decrease this by up to 10%.
- The transaction will be performed at a maximum discount of 10% to the last price at which it was traded.
- Investment banking firms DAM Capital and Citi are handling the block deal process.
Key Background
Vedanta, a prominent Indian global mining and metal corporation owned by Anil Agarwal, has declared its intention to offer a sizeable majority of its shareholding in Hindustan Zinc Limited (HZL). The firm is likely to dispose of as much as 10% of its holding of 63.42% in HZL with the aim of collecting around ₹7,500 crore from a block of block deals in the stock market.
This strategic decision is in line with Vedanta’s larger goal of deleveraging its balance sheet and improving financial solidity. The proceeds from the divestment are expected to be utilized to retire the group’s growing debt and to support growth plans within its unit, Hindustan Zinc. Significantly, Hindustan Zinc has recently sanctioned a gigantic capital outlay of ₹12,000 crore to establish a fresh integrated metal manufacturing facility at Debari, Rajasthan. The new facility, with an estimated capacity of 2.5 lakh tonnes per year, is intended to raise the company’s production of zinc, lead, and silver considerably.
The block deal is likely to be done at a discount of as much as 10% to the market price, which will potentially attract institutional investors who are seeking bulk investment at attractive valuations. Investment houses DAM Capital and Citi have been taken on board to manage and execute the transaction with ease.
Vedanta’s move to dilute its holdings in HZL follows a phase of financial restructuring and streamlining of its asset base. The company has also undertaken measures to restructure its listed companies to improve operational efficiencies and investor sentiments. While Vedanta will maintain majority control after the deal, the action indicates a change of tack towards value unlocking through strategic disinvestments and reinvestment in core businesses.
The Indian government continues to maintain around 29.5% in Hindustan Zinc since it was a public sector undertaking earlier, which was privatized. With this move, market observers will keenly observe how investor sentiment treats the transaction, the pace at which the funds are invested in the Debari expansion scheme, and how Vedanta manages its leverage well in the future.
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