Centre shortlists bankers for the sale of stake in Hindustan Zinc

It is now almost official that Hindustan Zinc Ltd will shortly go on the block. The government has reportedly shortlisted 5 merchant bankers to handle the sale of the government stake in Hindustan Zinc Ltd (HZL). The five merchant bankers are IIFL Securities, HDFC Bank, ICICI Securities, Axis Capital and Citigroup Global Markets. Government, it may be recollected, had confirmed that they would be happy to hive off their entire 29.53% holding in Hindustan Zinc Ltd (HZL). That will bring down the government stake in HZL to nil.

The process had started way back in July itself. At that time, the Department of Investment and Public Asset Management (DIPAM) had invited bids from merchant bankers for managing the stake sale of Hindustan Zinc Ltd (HZL). The merchant bankers were shortlisted on a number of eligibility criteria and now the data of the stake sale is to be officially announced. The 5 merchant bankers will assist government on the timing of the divestment, seek investor feedback, hold investor road shows and secure regulatory approvals.

There is a long history to the divestment of Hindustan Zinc Ltd (HZL). It is a central public sector enterprise (CPSE) falling under the ambit of the Ministry of Mines. It was first privatised in the year 2002. The government sold the stake to Vedanta group (formerly known as Sterlite group) in a series of tranches. On the completion of all the tranches, Vedanta, currently holds 64.92% stake in HZL. With the government holding 29.53% in Hindustan Zinc Ltd (HZL), the residual stake of 5.5% is with the general public holders.

The total sale of the government stake will entail the sale of 124.9 crore shares, representing 29.53% stake in Hindustan Zinc Ltd (HZL). Government will take a total exit from the company, nearly 20 years after the first tranche was sold. The government had not been keen to sell 100% to the Vedanta group so it had retained some stake in the company. This year, the government decided there was no point in holding and has decided to take a full exit from the company. This is part of the larger total privatization drive of DIPAM.

The government sold Hindustan Zinc Ltd (HZL) to the Vedanta group in 2 tranches. It first sold 26% and then allowed them to exercise the call option to buy another 18.92% in Hindustan Zinc Ltd (HZL). Subsequently, Vedanta also made an open offer to the shareholders as per the SEBI extant regulations and that took the total stake of Vedanta in Hindustan Zinc Ltd (HZL) to 64.92%. It is still not clear if Vedanta will be allowed to bid to buy the residual stake in Hindustan Zinc Ltd (HZL). After all, HZL is a cash rich company.

One thing is certain that the sale of stake in Hindustan Zinc Ltd (HZL) will simplify the government task in achieving the disinvestment target for the year. The sale of 124.9 crore shares held by the government in Hindustan Zinc Ltd (HZL) is expected to fetch the centre around Rs36,000 crore. For FY23, the government has a divestment target of Rs65,000 crore. Out of these, Rs24,544 crore has already been raised largely through the LIC stake sale. If Hindustan Zinc Ltd (HZL) is also done, then the divestment target would be a cakewalk for the government.