In light of promoter Vedanta’s recent offer for sale (OFS), which tested the market’s appetite for Hindustan Zinc Ltd (HZL), the government is considering using the same method to dilute a tiny piece of its remaining 29.54% ownership in the company during the current fiscal year.
With respect to the revenues from the offer for sale (OFS) of up to 3.17% in HZL (1.22% base offer size and option to retain oversubscription to the extent of 1.95%) on August 16–19, Vedanta did not reach its initial aim. Nevertheless, it only raised around Rs 3,100 crore by selling about 1.51% of the company, as opposed to the aim of up to Rs 6,500 crore, which was achieved by selling up to 3.17% of the company.
The Department of Investment and Public Asset Management’s opinion that the government share sale in the company should be made in tiny tranches has been supported, the official told FE, adding, “We will also explore for a small tranche in the current financial year.” Vedanta’s OFS in HZL has confirmed this.
At now, 63.41% of HZL is owned by Vedanta Ltd. Following the 2002–2003 privatisation of India’s largest zinc/lead miner, which favoured Vedanta, the Center’s 29.54% share was classified as public ownership. The government was allowed to leave by dumping the stock through public offers after Vedanta lost the case to purchase the remaining stake from the government in 2021.
At current market pricing, the government’s share in HZL is valued at around Rs 62,000 crore. The government’s share sale in HZL may take place in tiny tranches of about 1.5%, however, the exact timing would depend on the state of the market. HZL’s share price increased 1.42% from the previous closing on the BSE to conclude at Rs 496.55 on Friday. The government will thus need to find purchasers for a phased sale of its stock over a number of years, making its withdrawal from HZL a drawn-out process.
Due to investor trepidation over promoter Vedanta’s proposed related party transaction, the Centre had to postpone its planned share sale in the firm until FY23. The government has raised Rs 3,160 crore in disinvestment receipts thus far in the current fiscal year, mostly from the OFS in GIC Re. Instead of establishing distinct disinvestment objectives, the Centre has set a target of Rs 50,000 crore in various capital receipts (from asset monetisation and disinvestment) in FY25.
