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DoD seeks Sebi's opinion on HZL's management control

Sandip Das & Mamata Singh

The department of divestment has asked the Securities and Exchange Board of India to give its opinion on whether management control in Hindustan Zinc Ltd should be handed over to the strategic partner on the sale of 26 per cent stake or after the player has made an open offer for an additional 20 per cent.

The department has sought the clarification from Sebi to ensure that the government does not lose out in case the strategic partner ups the price in the open offer vis-a-vis the price paid to the government.

For example, if the buyer pays the government Rs 10 per share for 26 per cent stake and then makes an open offer at Rs 15 per share, it would have to pay an additional Rs 5 per share to the government for the 26 per cent stake.

The Sebi guidelines require the strategic partner to make an open offer for 20 per cent equity after it buys 26 per cent stake from the government.

DoD wants Sebi to clarify whether management control should be handed over immediately after the sale agreement for 26 per cent stake is signed, or whether it should be put off pending the additional payment to the government.

"We have not asked for any change in rules, but only a clarification on the existing Sebi guidelines," said officials. In case the strategic partner does not pay the amount to the government and the management control is handed over, it will create a problem, they added.

DoD has also asked Sebi to clarify whether the sale should be considered final when the agreement is signed and the cheque handed over, or when the cabinet clears the decision.

Currently, seven companies are in the fray for divestment in the state-owned zinc major.

Bidders including multinational Glencore, NRI Viren Rastogi-promoted Allied Deals, Bhushan Steel & Alloys, Binani Industries, Sterlite industries and Metdist, promoted by London Metal Exchange president Lord Bagrie have already completed the due diligence exercise. The bidders will be submitting their business plans over the next couple of weeks.

The competition for HZL, a profit-making public sector unit which produces 65 per cent of the country's total zinc output, is expected to be intense. The government is to dilute its stake in the PSU from the present 75.92 per cent to 49.92 per cent. The entire equity will be offloaded to a strategic partner.

The government had earlier diluted 24.08 per cent of its stake in the company by way of a public offering in 1992-93.

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