Hindustan Zinc divestment: Vedanta likely to withdraw 2009 arbitration today

The Supreme Court paved way for the government’s residual stake sale in Vedanta’s Hindustan Zinc on November 18. Hindustan Zinc is a subsidiary of Vedanta Limited.

The divestment exercise will start once the 2009 arbitration is withdrawn by the company, sources told CNBC-TV18. The government’s stake dilution in Hindustan zinc will be exercised through the exchanges via offer for sale or block deal.

Vedanta had first acquired 26 percent of government stake in Hindustan Zinc in 2002 and later acquired more stake via the first call option and open offer. In 2009, the company exercised the second call option as per the shareholders’ purchase agreement, which was disputed by the government and the company subsequently filed an arbitration to claim settlement.

CNBC-TV18 has learned that Vedanta is likely to withdraw its 2009 settlement arbitration on Friday.

Once the arbitration is withdrawn, the government is likely to move to the alternate mechanism on divestment headed by Union Finance Minister Nirmala Sitharaman and Minister of Road and Transport Nitin Gadkari along with related ministries. The alternate mechanism panel will decide on the size, number of tranches, and timing of the stake sale.

The government holds a 29.5 percent stake in Hindustan Zinc and expects around Rs 40,000 crore from the sale at the current market price.

During the Supreme Court proceedings, the Centre sought closure of preliminary inquiry into 2002 Hind Zinc divestment. However, the court held that there existed a prima facie case of violation of divestment norms in the 2002 government stake sale and disallowed the closure. The top court had directed that a regular Central Bureau of Investigation (CBI) probe be conducted into the matter.

In 2014, the Central Public Sector Enterprises (CPSEs) had moved an application in the court alleging undervaluation of shares during 2002 divestment. Following the allegations, the apex court stayed any further divestment of government stake in the company in 2016.