Centre to ask HZL to go for share swaps, warrants for $2.98 bn Vedanta deal

Centre may ask Hindustan Zinc Ltd (HZL) to consider options, other than cash, like share swaps, rights issues or warrants for the $2.98 billion acquisition of Vedanta's zinc assets, a report by Mint said. The Centre believes that the cash reserves must not be used for the party-related transaction. 

"We understand that the company needs to acquire mines to grow its business, but that should not be done through a cash acquisition. There are these options which the company can exercise. The government is a stakeholder in the company and has the right to cash reserves, and we will not let them use it for a related-party transaction," an official aware of the development told Mint. 

On January 19, the board of HZL approved the acquisition of zinc assets of THL Zinc Ventures, a subsidiary of Vedanta Ltd. THL Zinc will become a wholly owned subsidiary of HZL after the transaction is completed. According to the rules of the mines ministry, the deal violated minority stakeholder rights. 

Vedanta owns a 64.9 per cent stake in HZL, while the Centre owns 29.5 per cent.

The report added that the Centre has plans to sell its stake in HZL and it has written to the markets regulator opposing the deal. 

In a recent interview, HZL Chief Executive Officer (CEO) Arun Misra said that the deal was necessary and HZL cannot limit its size and capacity to where it is today. India's annual zinc consumption is 650,000-680,000 tonnes and is expected to grow by 3-4 per cent. HZL produces 800,000 tonnes annually. 

The approvals of the deal are expected to come in the next 18 months.