Date | 05th Sept 2016:
Amid talks that the government may be looking to sell its remaining stake in Hindustan Zinc Ltd (HZL), there is no such proposal for consideration with India’s ministry of mines, said government officials.
Billionaire Anil Agarwal’s metals and mining conglomerate Vedanta Resources Plc holds 64.92% in Hindustan Zinc, while the government is the second-largest owner with 29.54%. In 2002, the union government had sold 26% stake in the company to the Vedanta Group for Rs.445 crore. The government also holds 49% stake in Bharat Aluminium Co. Ltd (Balco), another company majority-owned by Vedanta.
“As per the Supreme Court’s order, further residual stake sale in the company has been stayed this January,” a senior government official said on condition of anonymity.
The government aims to raise Rs.56,500 crore in the current financial year by selling stakes in public sector enterprises. Of this, Rs.36,000 crore is estimated to come from minority stake sale and the rest from strategic sale in both profit and loss-making companies.
A second government official, who also did not want to be quoted, said the topic has not come up for discussion within the ministry.
The National Democratic Alliance government had approved the sale of its residual stakes in both HZL and Balco in July 2014. However, the stake sale could not happen at the time due to legal hassles.
The matter related to residual stake sale in both the companies was opposed by the law ministry, which was of the opinion that no further stake sale can happen in HZL and Balco without amending the Metal Corporation (Nationalisation and Miscellaneous Provisions) Act, 1976.
As per the Act, no change in the nature and character of the company could be allowed without the Parliament’s approval.
In August 2014, the Supreme Court began hearing a petition by the National Confederation of Officers Association of Central Public Sector Enterprises, which sought a stay on the residual stake sale. In January this year, the apex court put a stay order on the same, asking the government to not proceed with any sale of its minority stake in HZL.
According to information available on HZL’s website, the company’s profit after tax during the first quarter of the current financial year was down 47% at Rs.1,037 crore. Also, its income plummeted by 30% during the quarter to Rs.2,501 crore compared with Rs.3,596 crore during the year-ago period.
“Balco is also running in losses. As and when it turns profitable, the case of stake sale may be taken up by the department of investment and public asset management, but at this moment nothing is under consideration,” the second official quoted above said.
Queries emailed to the ministry of mines and Vedanta on 2 September did not elicit any response.
During March this year, Anil Agarwal, chairman of Vedanta Resources, had told newswire Press Trust of India stake sale of the government’s remaining shares in HZL and Balco could fetch it as much as Rs.25,000 crore.
Experts believe it may not be the appropriate time for further disinvestment in HZL.
“In terms of valuation, this is not the feasible time for selling the residual stake in HZL as the government may fetch lower realisation due to depressed commodity scenario,” said Dipesh Dipu, partner at Jenissi Management Consultants, a Hyderabad-based energy and resources consulting firm.
(Source: http://www.vccircle.com/)