Vedanta Ltd shares fell 6% in Tuesday trading, extending their losing streak to eight sessions. The stock dropped following a Business Today Television report claiming that the Centre was unhappy with Vedanta’s proposal to sell international zinc assets. According to the report, the government believes the move will impede and distort its plan to sell its 29.54 percent residual stake in Hindustan Zinc.
On Tuesday, the stock dropped 6.12% to a low of Rs 269.75. Vedanta shares fell for the eighth consecutive day. During the time period mentioned, the stock fell 14%.
Hindustan Zinc Ltd’s share price fell 4.14 percent to Rs 296.10. On Monday, it was down 3.4 percent.
The Centre last week objected to Vedanta’s proposal to sell its international zinc assets to subsidiary Hindustan Zinc for $2.98 billion due to valuation concerns. As of December 31, Vedanta owned 64.92 percent of Hindustan Zinc.
After adjusting for the cash component of $3.5 billion, the net debt of the Vedanta group is $11.8 billion. In terms of long-term debt repayments, the group has $1.2 billion due in the second half of 2022-23, $4.1 billion due in 2023-24, $3.9 billion due in 2024-25, and $4.7 billion due in 2025-26 and beyond.
The pledge of shares by promoters adds to the concerns. In the case of Vedanta, the promoter holding was pledged at 99.99 percent as of December 31, 2022. In contrast, at the end of December, 87.59% of the promoter holding in Hindustan Zinc was pledged.
According to a Business Today Television report, the government intends to take legal action to prevent the sale of the Africa-based assets to Hindustan Zinc.
“The first source of concern is that it is a related party transaction rather than a third-party transaction. Vedanta is the promoter and decision-maker for HZL, as well as the owner and decision-maker for the zinc asset. Why would Vedanta want to sell it if it is such a valuable asset? The shareholders have a right to know why and where this is necessary “According to the report, a government official said.
“The valuation is another major source of concern. How will an understanding of asset value be achieved if the buyer and seller are the same person? In terms of the residual stake sale, the likely investors will not be interested in such a deal. Better transparency is required because the valuation is not clear to shareholders or the market “said the official.
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