The government has decided to sell its remaining stake in Hindustan Zinc through auction route as it strives to meet the disinvestment target, and a formal proposal to the Cabinet in this regard will be sent soon, official sources said.
The sources further said that selling remaining 29.5 per cent residual stake in Hindustan Zinc, which is now controlled by Anil Agarwal’s Vedanta Resources, is expected to fetch about Rs. 15,000-20,000 crore.
In this year’s Union Budget, government had set a target of raising about Rs. 55,000 crore from disinvestment. Of this, Rs. 40,000 crore was estimated to come through part-sale of stake in public sector firms and Rs. 15,000 crore from selling residual stakes that government holds in some firms, including Hindustan Zinc and Balco.
So far, the government has managed to mop up only about Rs. 2,800 crore through disinvestment of PSU shares, including the just concluded follow-on public offer of Power Grid Corporation.
“There was a broad consensus with the Finance Ministry’s views on HZL stake sale issue in the last week’s meeting chaired by the Prime Minister that stake sale in Hindustan Zinc should happen through the auction route. A formal Cabinet note on the matter will be circulated soon,” a source said.
Earlier, the Finance Ministry had opined that Hindustan Zinc is no more a public sector company and selling shares through auction route does not require Parliament nod, while responding to the draft Cabinet note of Mines Ministry.
This view, however, was in contrast to those of Mines Ministry. The Law Ministry had also supported the Mines Ministry that selling residual stake in the zinc producer will require a Parliament nod as it was incorporated through a statute.
Currently the government holds 29.5 per cent stake in Hindustan Zinc Ltd (HZL) and 49 per cent stake in Bharat Aluminium Company (Balco). Majority stake in the two erstwhile PSUs was sold to Vedanta group during 2001-2003 by the then NDA government.
Current market valuation for remaining government stake in HZL is about Rs. 16,000 crore. However, the valuation of Balco has been a bone of contention and a case is pending in Delhi High Court on exercise of call options (that allows a company to acquire additional shares at a later stage) by Vedanta.
Last month, Vedanta chairman Anil Agarwal had said that Vedanta has received positive “indications” from government on the matter and it may happen soon.
“We are getting the indications but it is a democratic process. Sometimes it gets delayed but it will happen,” Mr. Agarwal said.
The company, which maintains that selling of residual stakes by the government is merely “housekeeping” work, has been trying for long to acquire remaining stakes in the two firms for having a total control.
In October, Vedanta had renewed the shareholders nod for making offers to the government up to Rs. 21,637 crore ($ 3.482 billion) for acquiring remaining shares in the two firms.
The upper ceiling is a nearly-40 per cent increase from Vedanta’s January 2012 offer of Rs. 15,493 crore.
If the company makes the offer at that level for HZL’s remaining stake, it would help the government meet over 39 per cent of the disinvestment target for the current fiscal.
Besides, it will be over 144 per cent of the targeted Rs. 15,000 crore by the government from residual stake sales for the fiscal.
Meanwhile, Finance Minister P. Chidambaram has recused himself from the decision of selling stakes in the two erstwhile PSUs due to his past association with Vedanta and Law Minister Kapil Sibal has been entrusted the responsibility to represent Finance Ministry on the matter.
Currently, Hindustan Zinc is the richest profit-making subsidiary of Vedanta and had cash and cash equivalent of Rs. 23,632 crore as of September, 2013. For the half-year ended September 2013-14 fiscal, it has reported net profit of Rs. 3,300 crore and revenues of Rs. 6,460 crore.