Exclusive: Govt likely to offload only 5-6 percent in HZL via OFS in FY24

The government holds 29.5 percent stake in HZL.

The government is likely to go for a small stake sale of 5-6 percent in Hindustan Zinc Limited (HZL) via Offer For Sale (OFS) in 2023-24 as the interests of institutional investors have been found lacking, a senior government official said.

“Only 5-6% may be sold in the first OFS tranche, it is not possible to sell more than this. It may fetch less than Rs 10,000 crore,” the official told Moneycontrol.

The government holds 29.5 percent stake in HZL. The Union Cabinet had given approval in 2022 to sell the government’s entire stake. The government will get approximately Rs 40,000 crore on sale of its entire residual stake.

“Not all investors are willing to buy a stake in HZL. There may not be manytakers. The feelers that the government got during roadshows earlier indicated that institutional investors were not interested in HZL with Vedanta Ltd as the promoter. Ultimately transaction advisors will decide the quantum stake for OFS,” he said.

HZL is an Indian integrated mining and resources producer of zinc, lead, silver and cadmium. It is a subsidiary of Vedanta Limited. Vedanta holds 64.92% stake in Hindustan Zinc.

After the quantum is decided, the OFS will need approval of the alternative mechanism (AM), which includes Finance Minister Nirmala Sitharaman, Minister of Road Transport and Highways Nitin Gadkari and a minister from the line ministry.

“The entire OFS cycle is of only one and a half months. So it should not take much time,” he said.

The official said that however, the entire 29.5 percent stake sale will happen over a long time in small tranches.

The government is aiming at selling its HZL stake after Vedanta withdrew its arbitration in 2022. Vedanta had filed arbitration in 2009 after the government rejected its second call option to buy 29.5% share in Hindustan Zinc. The Supreme Court in 2021 allowed the government to disinvest its residual stake in Hindustan Zinc in the open market.

Sebi allows non-promoter shareholders holding more than 10% to use the OFS route. Since the government holds more than 10% it has decided to opt for the OFS route to sell its stake in Hindustan Zinc.

A query to the finance ministry was unanswered till the publishing of the article.