(Recasts, adds background, Hindustan Zinc statement)
By Chris Thomas and Meenakshi Maidas
BENGALURU, Feb 20 (Reuters) - Vedanta Resources' efforts
to manage its debt load were dealt a blow after the Indian
government opposed the mining conglomerate's proposed $2.98
billion deal to move certain zinc assets from its flagship
company to another in which it is a majority shareholder.
The government opposed Hindustan Zinc Ltd , in
which it holds a near 30% stake, buying the Africa-based assets
from Vedanta Ltd , its top shareholder with a near-65%
stake, as it was a "related party transaction".
"We always believe in and operate in perfect manners of
corporate governance, so (there is) no deviation on that count,"
Hindustan Zinc Chief Executive Arun Misra told CNBC-TV18. The
company and Vedanta Ltd did not respond to Reuters' request for
comment.
The development comes a week after Vedanta Resources said it
had slashed net debt by $2 billion in the last 11 months, to
$7.7 billion, seeking to allay concerns days S&P Global Ratings
raised doubts about the billionaire Anil Agarwal-owned group's
financial health.
S&P Global had said the group's ability to meet its
financial obligations beyond September would depend on a planned
$2 billion fundraise as well as the proposed sale of THL Zinc
Ltd, a Vedanta Ltd unit that holds zinc assets in Africa.
That deal, announced on Jan. 19, is now in doubt after the
government-nominated directors on Hindustan Zinc's board opposed
the acquisition and said in a letter they would oppose further
resolutions.
However, the Ministry of Mines, in its letter, urged
Hindustan Zinc to "explore other cashless methods" for the deal.
The government is looking to sell its entire stake in Hindustan
Zinc as part of its efforts to replenish state coffers.
The deal, analysts have said, is unfavourable to Hindustan
Zinc's minority shareholders, who have to sign off any board
decision on related party deals in a meeting that Hindustan Zinc
has to call within three months of announcing the deal.
Hindustan Zinc said in an exchange filing it had not yet
called for the meeting but its board would consider the
government's position.
While miner Vedanta Ltd, has been hit by a fall in commodity
prices, Vedanta Resources is betting growth will be bolstered by
its associate firms' investment in areas like semiconductors,
display glass, renewables, optical fibre, and transmission.
Hindustan Zinc's shares have lost nearly 14.5% since the
deal was announced a month ago, while Vedanta Ltd'd shares have
lost about 5%. Both stocks were little changed on the day.
(Reporting by Meenakshi Maidas and Chris Thomas in Bengaluru;
Editing by Dhanya Ann Thoppil, Devika Syamnath and Savio
D'Souza)
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.