Govt to block HZL plan for Vedanta zinc assets

Majority of minority shareholders must approve deal; govt holds 29.5% in HZL

- Gulveen Aulakh & Mihir Mishra

Hindustan Zinc’s purchase of Vedanta’s zinc assets under the proposed sale approved by the company board is unlikely to go through, considering that a majority of minority shareholders will not approve the move, regardless of their shareholding, said a government official. Vedanta owns a 64.9% stake in HZL while the government holds 29.5%.

“In a related-party transaction, the promoters have to take approval of a majority of the minority shareholders by law, irrespective of the minority shareholding. Even if Vedanta had a 70% holding in HZL, it will not matter because they will have to sit out during the voting," the official said seeking anonymity.

In the event the government was a related party, the same rules would have applied to it, and it would have to sit out of the voting, the official added. It implies that the transaction involving acquisitions through an all-cash deal of $2.98 billion would be stalled.

As part of the divestment plan, the government plans to sell its stake in HZL, but funding the acquisition of Vedanta’s assets through HZL’s cash reserves and debt would impact the valuation of the government’s stake.