Vedanta pledges 86% Hindustan Zinc stake in Q4 as govt preps to sell stake

Value of pledged shares put at Rs 73,102 crore; 22.8 per cent was pledged in December quarter.

There is an update at the end of the story.

Metals and mining major Vedanta has pledged 86.1 per cent of its shareholding in Hindustan Zinc in the quarter ending March 31, 2022, marking a sharp increase in pledged shares by the promoter versus the December quarter. Vedanta has a 64.9 per cent stake in Hindustan Zinc.

To put things in perspective, Vedanta had pledged only 22.8 per cent of its shareholding in Hindustan Zinc in the December quarter, which was valued at Rs 19,839.4 crore. This jumped to Rs 73,102 crore in the March quarter, data compiled by BS Research Bureau shows.

The number of shares pledged by the promoter, according to BS Research data, now stands at 2,360.5 million shares versus 626.2 million shares pledged in the October-December period.

The share pledging by Vedanta acquires significance in the wake of the government's decision to sell its entire residual stake in Hindustan Zinc.

The Cabinet Committee on Economic Affairs (CCEA) had on Wednesday approved the sale of the government’s remaining stake of 29.5 per cent in Hindustan Zinc, as it sought to accelerate its disinvestment drive. The sale of the entire 29.5 per cent stake in the company would fetch the Centre Rs 38,062 crore. It would be sold in tranches through an offer for sale, a government official had told Business Standard.

Anil Agarwal, founder and chairman of Vedanta, had said recently that his group could not buy more than five per cent of the government’s residual stake in Hindustan Zinc unless the terms of the contract were changed.

Shares of Hindustan Zinc were down 1.97 per cent at Rs 299.05 apiece on the BSE at close of trade on Thursday. This came even as the broader BSE Sensex closed trade at 54,252.53, up 0.94 per cent over the previous day’s close.

Hindustan Zinc was a government-owned company till 2002. In April 2002, the government offloaded a 26 per cent stake in the company to Vedanta group’s Sterlite Opportunities and Ventures.

The group later bought 20 per cent from the market and another 18.92 per cent from the government in November 2003.

Clarification

The article “Vedanta pledges 86% HZL stake in March quarter” published on May 27, had mentioned that Vedanta had pledged 86.1 per cent of its shareholding (of 64.9 per cent) in Hindustan Zinc (HZL). Vedanta Limited (Vedanta) has clarified that: "In FY21, it pledged 14.82% and created Non-Disposal Undertaking (NDU) on 50.11% of HZL shares to secure a Loan. The non-disposal undertaking is not a “pledge” but rather done to ensure that the Promoter (Vedanta Limited) retain management control of HZL. In December ’21, Vedanta Limited has refinanced the said loan and reduced the pledge on HZL shares from 14.82% to 5.77% but kept NDU unchanged at 50.1% of the total shares of HZL." It further said: "As per SEBI rules, the NDU is reported as “otherwise encumbered” as these shares are “not pledged”. Hence, the pledge on HZL shares has reduced from December ‘21 quarter and as of now, the pledge is only on 5.77% of HZL shares (i.e. 8.88% of the Vedanta’s holding in HZL)."