Govt tells Hindustan Zinc it needs Centre's nod for splitting business into different entities: Report

The Centre has reportedly written to Anil Agarwal-controlled Hindustan Zinc Ltd (HZL) informing it that the company would need its approval for business reorganisation. Vedanta Group's Hindustan Zinc has been looking at splitting its business into three different entities -- zinc and lead, silver and recycling business. The company board at a meeting in September asked the company to explore corporate restructuring to unlock shareholder value, the Economic Times reported.

In October, CEO Arun Misra said that the splitting would increase the combined market value of the three companies to go up to anywhere between $25 billion to $30 billion.

The board had asked a committee of directors to evaluate the suggestions and recommend options and alternatives. "The government wrote the letter last month, through its nominee (from the mines ministry) on HZL board, after the September board meet," a government official told ET.

"The company has been clearly told that any move to create different entities will require the government's approval," the person added. Anil Agarwal-controlled Vedanta Ltd has 64.92 per cent stake in HZL and the government has a 29.54 per cent stake in it.

So far this year, Hindustan Zinc has paid a dividend of Rs 2,958 crore. In 2022, Hindustan Zinc paid over Rs 31,000 crore, more than a quarter of its market value, as dividend to help its cash-strapped promoter.

Hindustan Zinc's revenue from operations during the July-September period fell 18.5 per cent to Rs 6,619 crore, compared to the same quarter last year. It was mainly due to a fall in zinc prices, along with a reduction in the volume of zinc and silver mined, the company noted.

However, the rise in lead and silver prices, as well as favourable exchange rates, checked the fall.

Vedanta is also planning to split itself into six listed companies just like Hindustan Zinc, which would create separate listed entities for aluminium, oil and gas, iron ore and steel.

The company board approved the formation of six separate listed companies under Vedanta Aluminium, Oil & Gas, Power, Steel, and Ferrous Materials, Base Metals, and Vedanta Limited. For every share of Vedanta Ltd., investors will receive one share of each of the five new companies.

The new companies will invest $5 billion over the next 10 years in their commitment to achieve net-zero carbon emissions by 2050 and net water positivity by 2030. The company has already secured 1.8 GW of renewable energy through power delivery agreements across group companies.

Anil Agarwal, Chairman, Vedanta Ltd, said the demand for minerals, metals, oil, gas, and power will grow rapidly, and the newly formed companies are uniquely positioned to meet the rising demand and reduce reliance on imports.

Demerging the business units will unlock value and potential for faster growth in each vertical, he said.

Shares of Vedanta Ltd were trading at Rs 240.65, 0.80 per cent, at 9.20 am, on Friday. 

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