The central government is considering postponing its stake sale plans in Hindustan Zinc Ltd until there is a positive change in the industry’s prospects, reported Reuters citing two government sources. As per the report, the decision comes after receiving advice from merchant bankers. However, it also said that despite the potential delay, the government remains optimistic about finalising the long-pending sale within this financial year.
The government intends to sell its stake in Hindustan Zinc in phases, beginning with approximately 5 per cent of the stake, as per the report. Currently, the Vedanta Group holds a majority stake of 64.9 per cent. It also noted that Hindustan Zinc’s stock price has experienced a decline of more than 16 per cent since reaching its peak in January. This decline can be attributed to the sharp drop in zinc prices and the Vedanta Group’s attempts to sell two units to the miner.
The government is waiting for the share price to recover, an official told the news agency. “Merchant bankers have advised against a sale offer at the moment as institutional investors are presently not keen to invest in the metals sector,” the official said, as per the report.
According to rating agency ICRA, international zinc prices have undergone a correction of 30 per cent in the past six months, the report noted. This decline can be attributed to global macroeconomic uncertainties and sluggish demand recovery in China. The agency further said that the global consumption growth of aluminium, copper, and zinc is anticipated to remain subdued throughout this year.
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Notably, last week, the Supreme Court dismissed Vedanta’s plea to direct the Centre to divest its 29.54 per cent residual stake in Hindustan Zinc in the open market, saying it cannot interfere with a “policy decision”.
A Bench led by Chief Justice DY Chandrachud, while rejecting Vedanta’s application, said the company giving up on its call option was not conditional on the government having agreed to sell its stake in the open market, as per a report by ET.
The government had initially planned to sell approximately 5 per cent of its stake in Hindustan Zinc during the previous financial year. However, due to a decline in prices following the miner’s announcement in January to acquire two zinc subsidiaries from Vedanta, the government decided to postpone the sale. Eventually, the government opposed the deal, and it lapsed a few months later.
During roadshows conducted in December, government officials were informed by institutional or large investors that they were not particularly interested in acquiring significant stakes in Hindustan Zinc, said the Reuters report.