The Hindustan Zinc Ltd which is India’s largest and the world’s second-largest integrated Zinc producer
proposed to buy the zinc assets of Vedanta Group which multinational mining and also parent company
of Hindustan Zinc for $2.98 billion (Rs 24,146 crore ) in cash in January’s second week but this proposal
did not get this goal because of many reasons which will be discussed in proceedings arguments.
The Hindustan Zinc which subsidiary of Vedanta Group holds a stake of 64.95% while the government
of India holds a 29.5% stake in it. The Vedanta group is a leading natural resources conglomerate doing
business across India, South Africa, Liberia, and Namibia whose Non-Executive Chairman is Anil
Agarwal. The Vedanta group is facing a huge pile of debts including $500 million of loan repayments
due on Dec 31, 2023, and a $1 billion bond due January 2024 that is why the Vedanta group seeking to
get some cash and it is getting the proposal but it doesn’t happen.
Earlier, The Hindustan Zinc Ltd was a Central Public sector undertaking and it was sold by then BJP
Government to Vedanta Group.
Also, Vedanta has issued its share of 10 cr valued i.e 2.44% of its equity in Hindustan Zinc according
to its Regulatory Filing Report to the Regulating Body and by this event, 91% of Vedanta’s 64.92%
stake in Hindustan Ltd is now pledged.
THE DEAL OF BID FOR ASSET
The Hindustan Zinc Ltd proposed to buy the Zinc Assets of the Vedanta Group for $2.98 billion (Rs
24,146 cr )in cash as it is needed by Vedanta Group to clear its debts and it is also one of the contention
of the Government of India that this deal is why only in cash and urged Vedanta group to look the other
cashless methods of Acquisition of these assets.
The Deal was announced by Hindustan Zinc Ltd in January’s second week and it gets the time of 3
months to approve this deal from its majority of the stakeholder it called an extraordinary general
meeting to take the mandate from its minority shareholders but these meetings were unfruitful and the
mandatory 3 months time limit lapsed. In March, It declared a final dividend of RS 110 billion ($1.34
billion) and attached up its cash reserves through which it was planning to fund the deal but it didn’t
reach the limit and it also has many other hurdles to it.
LOGGERHEADS IN THE DEAL
- THE GOVERNMENT OF
The Government had voted out the deal by its three representatives as directors in the nine-member HZL board arguing that it is a “ related party transaction” and the Ministry of Mines had raised the issues of only cash-based deals and using its reserve for this deal. It urged the Vedanta group to look into cashless methods of acquisition of its assets.
Also, the government was looking to sell its stake in HZL by offer for sale(OFS) mode and the HZL
share price have get falling since the deal was announced and which has jeopardised the government’s intent to sell its share of HZL and put its plan hold.
- THE MINORITY STAKEHOLDER ISSUES
As per the rules of Substantial Acquisition of Share and Takeover Regulation,1997 Part II, The company who is acquiring the stakes should have 3 months time periods to get the mandate or approval of its majority(approx. 47% ) of the stakeholder, and the government is the largest minority shareholder in HZL with 29.54% stake and the deal gets lapsed as it didn’t get the approval from its stakeholder and it argues that it will disadvantage the minority stakeholder.
To sum up, Hindustan Zinc Ltd’s proposed acquisition of Vedanta Group’s zinc assets for $2.98 billion in cash ran into several obstacles and fell through. The Indian government, which has the largest minority stake in HZL, voted against the acquisition on the grounds that it involved a related party transaction, used reserves for the transaction, and that the share price of HZL had fallen since the proposal had been announced.
- The deal’s failure to get the support of the majority of stakeholders within the allotted period worried the minority stakeholders as well. Determining what alternative possibilities the Vedanta company would pursue to pay off its obligations is still up in the air since the deal did not go through.