Hindustan Zinc, Vedanta shares rise despite roadblock in restructuring plan amid Government concerns

Responding to the queries, HZL Chief Executive  OfficerArun Misra told Mint, “Based on the report submitted by a reputed consultant, we firmly believe that the exercise of demerging HZL to create a Silver and Zinc entity separately will help in improving the market cap of the company as a whole resulting into value unlocking for all the shareholders. We have received a response from the Ministry of Mines which however is yet to be discussed in the board along with our observations.”

Also Read | Hindustan Zinc CEO Arun Misra shares future expansion plans, factors behind four consecutive cost reductions and more

In a letter to the mines ministry this month, Hindustan Zinc Limited conveyed that it wouldn’t proceed with any demerger proposal that the government disapproves of and that it would take the Centre on board while adopting such a plan, according to people familiar with the matter. “The matter is going to be put off, although the company would take a formal decision in due course,” one of them said, as quoted by ET. Anil Agarwal-controlled Vedanta Ltd holds a 64.92% stake in HZL.

The stocks of HZL were trading in green, at ₹296,  up 0.68 per cent on March 22, at 9:37 am, on BSE. The stocks of Vedanta Limited were trading in red at ₹273.10 at 9:38 am on BSE.

In January 2024, Mint reported that the company is currently undergoing a strategic restructuring initiative driven by the decision of the Board of Directors. This comprehensive review of the corporate structure aims to unlock potential value by creating separate legal entities for the zinc and lead, silver, and recycling business verticals.

By establishing separate legal entities, we aim to offer distinct investment profiles tailored to attract deeper and broader investor bases.

The government had previously rejected HZL’s proposal to create only two separate entities—one for zinc/lead and another for silver—while turning the recycling business into a subsidiary. This marks the second time in just over a year that HZL’s proposals have been shot down by the government, following the earlier rejection of the miner’s acquisition of parent Vedanta’s global zinc assets in a $2.98-billion cash deal, the report added.

In response to the government’s concerns, HZL presented a plan to create only two separate entities. However, the government cited the integrated nature of HZL’s business and argued that any segregation would only complicate operations without adding value for the company’s shareholders. The government also aims to avoid any uncertainty around HZL that could unsettle investors ahead of its plan to offload a part of its stake in the miner through an offer for sale in FY25, the report further added.

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Published: 22 Mar 2024, 11:35 AM IST