Vedanta may buy 6% more stake in Hindustan Zinc for Rs 7,900 cr

Govt planning OFS to sell 15% stake by March-end, will lose special rights over company; sources says Vedanta is looking raise about $1 billion from three foreign banks to fund the acquisition

The Vedanta group, which currently owns 64.9 per cent stake in Hindustan Zinc, is planning to acquire an additional 6 per cent stake in the company, as and when the government sells its holding.

The additional stake will cost the Anil Agarwal company around Rs 7,900 crore while the Indian government will lose its special rights over the company.

The Indian government currently owns 29.5 per cent in the company and plans to sell 15 per cent via an OFS (offer for sale), Vedanta chairman Anil Agarwal told CNBC on March 3.

Banking sources said Vedanta is in talks with three foreign banks to raise close to $1 billion to finance the acquisition.

DIPAM Secretary Tuhin Kanta Pandey said on February 3 that the government is likely to sell a part of its residual stake in Hindustan Zinc by March-end to help it achieve the revised sell-off target of Rs 50,000 crore for the current fiscal. The Centre will raise about Rs 19,755 crore, based on Friday's closing price.

The additional stake will help Vedanta move ahead with its plans to merge its overseas zinc business with HZL. The proposal had been shot down by government representatives on the board on February 17, who said the move is against the interests of minority shareholders.

A Vedanta spokesman declined to comment.

Last May, the Cabinet Committee on Economic Affairs had approved the sale of 1,240 million shares held by the government in HZL.

The HZL and Vedanta zinc business merger is crucial for the group to meet its future financial obligations. On February 9, S&P had warned that the liquidity of Vedanta Resources, the parent firm of BSE-listed Vedanta, is dependent on its ability to raise $2 billion and on the HZL merger deal. The zinc transaction would be positive for the company, providing Vedanta Resources with potentially $2 billion of liquidity, S&P had said.

Vedanta Resources holds 70 per cent in Vedanta, which in turn has 65 per cent ownership in Hindustan Zinc.

Bankers said the group is currently focused on completing the HZL deal before March-end. "The ball is in the government's court."