Vedanta plans to use proceeds from the sale of its international zinc assets to subsidiary Hindustan Zinc for deleveraging, acquisitions, capital expenditure and dividend payment, the company told analysts on an earnings call.
Vedanta said January 19 its board approved the sale of its Zinc International assets held by wholly owned subsidiary THL Zinc Ventures (Mauritius) to a proposed wholly owned unit of Hindustan Zinc for $2.98 billion.
Asked how the sale proceeds will be used, Vedanta’s top management said no inter-company loans are being considered. An analyst asked if any inter-company loans or asset buybacks from Vedanta Resources, the group holding company, to Vedanta could be expected.
“Any kind of inter-corporate loan is out of the question,” said Ajay Goel, group chief financial officer for Vedanta.
The proceeds will be used to fund the group’s capital expenditure plans, acquisitions (if any), payment of dividends, and deleveraging at the Vedanta and Vedanta Resources level, Goel said.
Vedanta reported net debt of Rs 38,076 crore as of December 2022. In its investor presentation on January 27, the company said it intends to enhance value by acquiring accretive assets or businesses that have synergies with its core businesses.
Confident of approval
Responding to analysts who raised concerns over approval of the sale, after the government apparently did not approve the transaction when it was proposed back in 2012, company officials said they expect to get clearance this time, given that it is an opportunity for Hindustan Zinc to expand its profile overseas.
“So, the government is looking at the global footprint. We believe that this proposal could be exciting for the country, for the government, and why should the government not support it?” asked Sunil Duggal, chief group executive officer for Vedanta. “From the time then (2012) to now, you can see that the total contained metal in ZI (Zinc International) is more than at this point of time. So, it creates a huge synergy.”
Zinc International’s overall production increased 32 percent YoY to 70,000 tonnes in the third quarter of FY23. Vedanta’s zinc assets overseas are located in South Africa and Namibia.
The success of Hindustan Zinc transitioning to underground, putting up the smelting capacity, integrating the operation is a winning combination and with that winning combination, the government gains, Duggal said.
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