The government sees no valuation creation in Hindustan Zinc’s split proposal for shareholders (Image Source: iStockphoto)
The Mines Ministry has declined a proposal by Hindustan Zinc Ltd, a subsidiary of the Vedanta group, to divide the company into separate entities, as confirmed by a senior official on Friday. The government, holding a 29.54 per cent stake in Hindustan Zinc, asserted its decision as the largest minority shareholder.
“We have not agreed to the proposal,” said Mines Secretary V L Kantha Rao. Mines Secretary Rao stated during a press interaction that the ministry did not consent to the proposed split. When pressed for details regarding the rejection, Rao cited lack of conviction as a shareholder based on the report presented.
Hindustan Zinc had earlier unveiled plans to restructure its operations by segregating business units, including zinc and silver, with the aim of bolstering market capitalisation. The company had engaged a prominent advisory firm to evaluate the proposed restructuring.
The rationale behind the restructuring, according to Hindustan Zinc, was to unlock potential value for stakeholders, optimize capital structure, and sharpen focus on core competencies. The move also aimed to create distinct legal entities for zinc, lead, silver, and recycling businesses.
However, the government expressed skepticism regarding Hindustan Zinc’s reasoning for the split and formally objected to the proposal. The Ministry of Mines conveyed its dissent to the company.
CEO of Hindustan Zinc, Arun Misra, acknowledged receipt of the ministry’s communication and stated that it would be deliberated upon by the board and management. Misra contended that segregating the company into separate zinc and silver entities could enhance its market capitalisation, citing a consultant’s report.
It’s worth noting that a year earlier, the government had thwarted Hindustan Zinc’s bid to acquire two Vedanta entities, despite Vedanta holding a controlling 64.9% stake in Hindustan Zinc. The government’s intervention led to the abandonment of the acquisition plan.
At the time of filing, the shares of Hindustan Zinc were trading at Rs 296.55, 0.90 per cent up from the previous day’s closing. The 52 week high and low of the share is Rs 344 and Rs 284.60 respectively.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. TT Research DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
(With Inputs From PTI Agency)
