HZL divestment: Bids invited from merchant bankers

The government has invited bids from merchant bankers for divesting its 29.5 stake in Hindustan Zinc (HZL) through open auction.

 

The Department of Disinvestment under the finance ministry has asked for proposals from bankers to undertake fresh valuation and assessment of fair share value of HZL, controlled by Vedanta’s Anil Agarwal.

Apart from valuation, the bankers will advise the government on timing and modalities of the open auction.

 

Last month, Cabinet had cleared the proposal for divestment of its stake.

 

Vedanta had earlier offered Rs 17,000 crore to buy out the government's stake in both HZL and Balco (where the government holds a 49% stake). Vedanta already has its shareholders' approval to increase its offer to up to Rs 21,637 crore ($3.48 billion) for buying out shares. The government is yet to take a call on Balco stake sale.

 

At the current market valuation, the government's HZL stake is valued around Rs 16,000 crore. But it is expected to get a higher price through the auction route, as HZL is sitting on cash reserves of Rs 23,632 crore. 

 

HZL, which has a zinc-lead output capacity of 1 million tonnes per annum and is also a leading silver producer, is one of Vedanta's profitable arms. 

 

The government has been struggling to spur its revenues and meet its fiscal deficit target of 4.8% of GDP in 2013-14. It had budgeted raising Rs 14,000 crore through sale of residual stake in non-government firms and another Rs 40,000 crore through direct disinvestment. By offloading equity in HZL, it is likely to exceed its Rs 14,000-crore target. So far this year, the government has raised Rs 3,000 crore from disinvestment, including Rs 1,637 crore through the recent stake sale in Power Grid Corp.