Govt to check foreign fund appetite in Hindustan Zinc before stake dilution

The government will assess the appetite of large foreign funds in Hindustan Zinc before taking a decision on the timing of dilution of its minority equity stake in the Anil Agarwal-owned metal company, an official has said.

The government currently holds a 29.54 per cent stake in HZL, while a 5.54 per cent stake is with public shareholders. Mining mogul Anil Agarwal's Vedanta Ltd is the promoter with a 64.92 per cent stake in HZL.

The Cabinet Committee on Economic Affairs (CCEA) approved the sale of 124.79 crore shares or 29.54 per cent stake the government holds in the zinc producer.

At the current price of Rs 316 a share, a 29.54 per cent stake would fetch about Rs 39,000 crore to the government.

The official said since public float is only about 5 per cent, it would not be feasible for big investors, who put in lump sum funds in the company, as share availability in the market is limited.

"Merchant bankers will first assess the interest of large fund houses in HZL. Once we get a fair idea of the demand, we will take a call on the timing and the quantum of stake that can be offloaded," the official said.

Markets being at an all-time high won't be an impediment in HZL stake sale as the share sale would mainly depend on the outstanding stock available in the market.

"If today foreign investors or sovereign funds want to put a lump sum amount, say Rs 100 crore, into the stock he won't be able to do so as there is not enough public float. In that case, they will wait for the government's offer for sale. The merchant bankers are assessing the appetite," the official said.

As per the latest stock exchange data, in terms of the number of shares, foreign institutional investors like banks have a negligible holding in HZL. However, Foreign Portfolio Investors (Category I) have around 0.81 per cent holding in the company.

The government had in 2002 sold its 26 per cent shareholding along with management control to Sterlite, which is a part of Agarwal's Vedanta group, for Rs 40.5 per share -- thereby giving Vedanta group management control in HZL.

Vedanta group later bought 20 per cent from the market and another 18.92 per cent from the government in November 2003, raising its ownership in HZL to 64.92 per cent.