The Indian government has written to the market regulator to object to plans by Hindustan Zinc to acquire two Vedanta Group subsidiaries, Mining.com reported on March 2. The Indian government is the largest minority shareholder in Hindustan Zinc with a 29.54% stake. Hindustan Zinc's board in January approved the acquisition of Vedanta's zinc business for $2.98 billion in cash. Since then, Hindustan Zinc's share price has fallen by almost a sixth.
The mining ministry's letter, sent in February, said the government had "no knowledge" of the deal despite being the company's largest minority shareholder, one official said. In its letter to Hindustan Zinc, the government said it would take legal action if the company went ahead with the all-cash deal. Indian rules would allow the government to block the deal, which would be considered a "related-party transaction" requiring the approval of a majority of the company's minority investors.
Vedanta first acquired a 26 per cent stake in Hindustan Zinc from the government in 2002 and a further 20 per cent through an open offer, giving it a 64.9 per cent stake. The two sides then became embroiled in a dispute that prevented the government from selling its remaining 29.54 per cent stake in Hindustan Zinc. The dispute ended in 2022, when the government planned to sell a stake in Hindustan Zinc to help meet a divestment target of 500 billion rupees (about $6.06 billion) in 2022-2023.
Indian government officials said the proposed deal between Hindustan Zinc and Vedanta jeopardized the government's plans as investors became jittery, sending Hindustan Zinc's share price down. The official said the proposal, which was due to be rolled out in March, was now subject to uncertainty.
