HZL will need approval to create separate business entities: Govt

In a meeting held on September 29, HZL's board had asked the company to explore corporate restructuring and create three separate legal entities for Zinc and lead, silver, and recycling biz

The mines ministry has sent a letter to Hindustan Zinc Limited (HZL), emphasising that any business restructuring would need to receive government approval, The Economic Times (ET) reported, citing people familiar with the development.

Earlier, in a meeting held on September 29, HZL's board had asked the company to look into the possibility of corporate restructuring and proposed the idea of creating three separate legal entities for the Zinc and lead, silver, and recycling business of the company to unlock shareholder value, the ET report said.

Notably, the government has a 29.54 per cent stake in HZL. Vedanta Ltd, owned by Anil Agrawal, holds a 64.92 per cent stake in HZL.

The HZL board has asked the committee of directors to explore the reorganisation and conduct an analysis to recommend options and alternatives. The person cited above told The Economic Times, "The government wrote the letter last month, through its nominee (from mines ministry) on the HZL board, after the September board meet."

The person said that the government has clarified its stance that any restructuring to create different entities will need approval from the government.

Government nominees in the HZL were absent from the HZL board meeting when the subject was discussed, the person underlined. Significantly, the company did not inform the government of the agenda of the meeting for its consideration.

In its response to the letter from the government, HZL has said it is only evaluating the possibility of restructuring and will reach out to the government for clearance before making a move on the subject.

In addition to HZL, the Vedanta group is also considering a broad overhaul and creating separately listed entities for aluminium, oil and gas, iron ore, and steel, the ET report said.