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“The government has decided to undertake fresh valuation and assessment of fair share value of HZL… the proposal can be submitted by June 27,” the department said in the request for proposal.
The government holds 29.5 per cent in Hindustan Zinc. In January this year, it had decided to sell its stake through auction. At the current share price of Rs 173.10, the government will get about Rs 21,500 crore but it is expected the value through auction will be much higher, as HZL is sitting on huge cash reserves and investments worth Rs 25,500 crore. As of March 31, 2013, the company had paid-up capital of Rs 845 crore.
Interim Budget 2014-15 had pegged disinvestment proceeds at Rs 36,925 crore, while another Rs 15,000 crore was expected from stake sales in Hindustan Zinc and Bharat Aluminium Company Ltd (Balco). A higher valuation will help the new government increase spending on infrastructure, while containing its fiscal deficit, pegged at 4.1 per cent of gross domestic product for this financial year.
During the previous NDA government in 1998-2004, Vedanta Resources Chairman Anil Agarwal had bought controlling stakes in HZL and Balco, through divestment. The London-based Vedanta holds 64.92 per cent stake in HZL and 51 per cent in Balco.
Last financial year, the United Progressive Alliance (UPA) government had planned to sell residual stake in both companies. However, in interim Budget 2014-15, it had postponed the stake sales to this financial year. The issues of selling residual stake in the Anil Agarwal-controlled companies and revival of sick public sector undertakings came up during a presentation to Finance Minister Arun Jaitley last week.
Earlier, Vedanta had offered Rs 17,000 crore to buy the government’s stakes in HZL and Balco, in which the government held 49 per cent. Vedanta has already secured shareholder approval to increase its offer to up to Rs 21,637 crore ($3.48 billion).
Agarwal had earlier said he had received positive indications from the UPA government on the matter. “We are getting indications, but it is a democratic process. Sometimes, it gets delayed but it (the stake sales) will happen,” he had said.
HZL is one of the profitable subsidiaries of Vedanta and one of the largest integrated producers of zinc-lead, with a capacity of one million tonnes a year. It is also a leading producer of silver.
