The Centre is "upset" about Vedanta's proposal to sell international zinc assets, as it feels the move would "hinder and distort" the government's plan to dispose its residual stake in Hindustan Zinc Ltd (HZL).
Last week, the Centre opposed Vedanta's Ltd's proposal to sell its international zinc assets to HZL for $ 2.98 billion over concerns about valuation.
The government is planning 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. "The Centre needs to be convinced as to why this decision is being taken by the management. A greater level of scrutiny is needed in this case," a finance ministry official said.
"The first cause of concern is that it is a related party transaction, and not coming from a third party. Vedanta is the promoter and decision-maker for HZL, and Vedanta is also the decision-maker and owner of the zinc asset. Why does Vedanta want to part with it if it is such a good asset? The shareholders deserve to understand why and where there is a need to do this," another government official said.
The Ministry of Mines and the Department of Investment and Public Administration have an internal exchange of views on this matter.
"The other big cause of concern is the valuation. If the buyer and seller are one, how will an understanding of the value of assets be achieved? As far as the residual stake sale is concerned, the probable investors will not be attracted to a deal like this. There needs to be better transparency since the valuation is not clear to the shareholders or market," added the official. The Centre had sold 26 per cent of HZL to mining billionaire Anil Agarwal's Vedanta group in 2002. The Vedanta group later acquired 20 per cent from the market, and another 18.92 per cent from the government in November 2003, raising its ownership to 64.92 per cent in HZL, which is the world's second-largest integrated zinc producer and sixth-largest silver producer globally.
"We of course have HZL lined up in our divestment pipeline for the coming financial year, but we will now wait. I am told that Vedanta will conduct a meeting with the shareholders in three months from now. Initially, we were looking to sell close to 5-7 per cent of the remaining stake. We may want to sell in tranches," the official added.
The Centre has pegged a disinvestment target of Rs 55,000 crore for the fiscal 2023-24 and is expecting to fetch Rs 15,000 crore from a tranche of its residual stake in HZL.
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