The government intends to reject Hindustan Zinc’s offer to pay $2.98 billion for the global zinc assets of Vedanta.
The government which plans to sell its nearly 30% stake in Hindustan Zinc through an offer-for-sale mechanism, is likely to vote against the plan due to worries about everything from high valuations to the fact that it involves a related party.
They added that the government is attempting to persuade Hindustan Zinc to withdraw the proposal and claimed that the idea was forced through despite government officials’ refusal to approve it.
Last month, Hindustan Zinc and its parent company decided to buy THL Zinc Mauritius’ assets in 18 months in a phased acquisition. THL’s businesses include Skorpion Zinc (Pty) in Namibia and Black Mountain Mining (Pty) in South Africa.
Analysts have warned that the expensive deal will deplete Hindustan Zinc’s cash reserves, which Vedanta owns approximately 65% of. Regular dividend payments from the unit to the parent have assisted in increasing cash flow for Vedanta Resources.
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