Govt To Ask Hindustan Zinc To Go For Share Swaps, Warrants For $2.98 Billion Vedanta Deal: Report

The board of Hindustan Zinc on January 19 approved the acquisition of zinc assets of THL Zinc Ventures, a subsidiary of Vedanta Ltd

Anil Agarwal's Vedanta owns a 64.9 per cent stake in Hindustan Zinc, while the Centre owns 29.5 per cent

The central government likely to ask Hindustan Zinc Ltd (HZL) to consider options, other than cash, like share swaps, rights issues or warrants for the $2.98 billion acquisition of Anil Agarwal's Vedanta's zinc assets, according to a report by Mint.

According to the Mint report, the government believes that the cash reserves must not be used for the party-related transaction.

An official privy to the development told the publication, "We understand that the company needs to acquire mines to grow its business, but that should not be done through a cash acquisition. There are these options which the company can exercise. The government is a stakeholder in the company and has the right to cash reserves, and we will not let them use it for a related-party transaction."

The board of Hindustan Zinc on January 19 approved the acquisition of zinc assets of THL Zinc Ventures, a subsidiary of Vedanta Ltd. THL Zinc will become a wholly owned subsidiary of HZL after the transaction is completed. According to the rules of the mines ministry, the deal violated minority stakeholder rights.

According to the report, Vedanta owns a 64.9 per cent stake in Hindustan Zinc, while the Centre owns 29.5 per cent. The report said that the central government has plans to sell its stake in Hindustan Zinc and it has written to the markets regulator opposing the deal.

Hindustan Zinc’s Chief Executive Officer (CEO) Arun Misra said that the deal was necessary and Hindustan Zinc cannot limit its size and capacity to where it is today.

Annual zinc consumption in India is 650,000-680,000 tonnes and is expected to grow by 3-4 per cent. Hindustan Zinc produces 800,000 tonnes annually. The approvals of the deal are expected to come in the next 18 months.

Earlier, Vedanta was planning to slash a massive debt pile hit a roadblock after the Centre said it would block the sale of a zinc manufacturing unit. The government has threatened to take legal action to stop Vedanta Group from selling the unit to its subsidiary Hindustan Zinc Ltd.