Vedanta Ltd. stock fell 6% in trade, making it eight sessions in a row that it has lost money. A Business Today Television article that claimed the Centre was angry about Vedanta’s plan to sell worldwide zinc assets caused the stock to fall. This is because, according to the article, the government believes that the action would obstruct and distort its intention to sell its remaining 29.54 percent interest in Hindustan Zinc.
A brief about Vedanta group shares drop by 6%
The stock dropped 6.12% on Tuesday, reaching a low of Rs 269.75. Vedanta shares fell for the ninth day in a row on this day. The stock has decreased 14% throughout the aforementioned time frame.
At Rs 296.10, Hindustan Zinc Ltd. decreased by 4.14 percent. As of Monday, it was down 3.4%.
Last week, the Centre expressed opposition to Vedanta’s plan to transfer its overseas zinc holdings to a subsidiary of Hindustan Zinc for $2.98 billion due to valuation issues. On December 31st, Vedanta owned 64.92% of Hindustan Zinc.
After deducting the cash component of $3.5 billion, the net debt of the Vedanta group is $11.8 billion. The group must pay back $13.9 billion in long-term debt by the second half of 2022–2023; $1.2 billion by 2023–2024; $4.1 billion by 2023–2024; $3.9 billion by 2024–25; and $4.7 billion by 2025–2026 and beyond.
The promoters’ pledge of shares is a worry as well. In the case of Vedanta, as of December 31, 2022, 99.99% of the promoter stake was committed. On the other hand, towards the end of December, 87.59% of the promoter ownership in Hindustan Zinc was committed.
According to the Business Today Network report, the government intended to file a lawsuit to halt the sale of the assets located in Africa to Hindustan Zinc.
“The fact that it is a transaction with a connected person and not a third party is the first reason for concern. The promoter and decision-maker for HZL is Vedanta, which is also the owner and decision-maker for the zinc asset. Given how valuable an asset it is, why does Vedanta want to sell it? The shareholders should be informed of the need for this and why it exists “An official from the government was quoted in the story.
“The valuation is a significant additional source of worry. How will the worth of the assets be determined if the buyer and seller are one? The likely investors won’t be drawn to a deal like this as it relates to the residual stake sale. As the valuation is unclear to the market or the shareholders, there needs to be greater openness “the official noted.