Ministry’s objections on demerger to be taken up in board meet: Hindustan Zinc
It could be back to the drawing board for Vedanta Group firm, Hindustan Zinc, with the Union Mines Ministry – a minority shareholder in the company – rejecting the initially proposed demerger plans of the zinc miner.
The current proposal includes creating three separate legal entities c one for zinc and lead, another for silver, and ultimately a third for recycling business – to unlock shareholder value.
The objections by the Ministry are to be discussed at a board level, while “observations” of the management will also be taken up then.
There could be some more tweaking of proposals and discussions taken up again with the Ministry; or the proposed demerger plan could be putoff for the time being.
A Ministry official said that Hindustan Zinc was operating profitably as a single unit but there was no guarantee that post demerger, different companies will continue to be equally profitable
VALUE UNLOCKING
According to Arun Misra, MD and CEO, Hindustan Zinc, said, the demerger will help improve marketcap of the company and improve in valueunlocking. The response of the Ministry, which the company received, is “yet to be taken by the board”.
“Based on the report submitted by reputed consultant, we firmly believe that the exercise of demerging Hindustan Zinc to create a silver and zinc entity separately will help in improving the market cap of the company as a whole resulting into value unlocking for all the shareholders,” he said.
“We have received a response from the Ministry of Mines, which, however, is yet to be discussed in the board along with our observations,” Misra said.
MINISTRY APPROVAL
“Either way, the demerger or any proposal surrounding Hindustan Zinc needs to take place keeping the Mines Ministry onboard,” a Ministry official said. The demerger proposal requires approval of shareholders. While Anil Agarwalowned Vedanta has a 64.92 per cent majoritystake in Hindustan Zinc, the Mines Ministry holds around 29.54 per cent.
On Friday, Mines Secretary, VL Kantha Rao said, the Centre had “not agreed to the demerger proposal”. “We have not agreed to the proposal as a shareholder,” he said on the sidelines of a FICCI event here in the city.
Ministry sources said, that they was not convinced of the consultant report provided. There could be further round of discussions and other proposals discussed. “As of now we are not convinced of the consultant report. We even discussed it across ministries and came up with the opinions,” another Ministry official said. The official pointed out that Hindustan Zinc was operating “profitably as a single unit”. There was no guarantee that post demerger, different companies will continue to have a similar valuation or be equally profitable. “It is doing well as a single unit. And it is business as usual there. And is profitable company. Why do they need to tinker with it at this moment,” the official pointed out.