Sale of Hindustan Zinc stake

May 28, 2022

The Union Cabinet Committee on Economic Affairs (CCEA) has approved the sale of the government’s remaining stake of 29.5% in Hindustan Zinc Limited (HZL). At the current market price, the sale of the government’s 29.5% stake will fetch the government Rs 38,062 crore.

Why government is selling its stake in Hindustan Zinc?

The sale of a stake in Hindustan Zinc is part of the government’s divestment objectives. As there is a delay in the strategic sale of Pawan Hans, the Shipping Corporation of India (SCI), IDBI Bank, and Bharat Petroleum Corporation Ltd (BPCL) government is considering other options to meet disinvestment targets. Recently, LIC IPO has raised around Rs 20,560 crore. The government is also planning to offload its 7.91% stake in ITC. The government’s disinvestment target for FY23 stands at Rs 65,000 crore.

What is the ownership history of Hindustan Zinc?

Hindustan Zinc was earlier a company owned by the government. In 2002, the government offloaded a 26% stake to Vedanta group. This enabled the privatization of Hindustan Zinc. In 2003, Vendanta group again bought 18.92% from the government. In the same year, it also bought 20% from the market. Thus Vedanta group’s total stake in Hindustan Zinc Limited reached 64.92% and the remaining 29.5% was with the government.

Last year, the Supreme Court said that Hindustan Zinc Limited is no longer a public sector undertaking (PSU) and the Centre can sell its remaining stake of 29.5% in Hindustan Zinc Limited.  However, the Supreme Court directed the Central Bureau of Investigation (CBI) to investigate the initial transaction under which the Centre had sold 26% of Hindustan Zinc in 2002.

Now Union cabinet approved the sale of the remaining stake of 29.5%. Earlier, the Centre in its affidavit said that the remaining stake will be sold in the open market. Shares of Hindustan Zinc surged 7% to Rs 315.90 after reports suggested that the Cabinet approved the sale of the remaining stake. As of FY22, Vedanta has total debt of Rs 53583 crore while Hindustan Zinc’s total debt is Rs 2844 crore.

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