Updated: Jan 24
Vedanta Ltd., the Indian multinational mining company, recently announced plans to sell its international zinc operations to unit Hindustan Zinc Ltd. for $2.98 billion.
What is happening: Vedanta Ltd. announced plans to sell its international zinc operations to unit Hindustan Zinc Ltd. for $2.98 billion which would enable it to benefit from a dividend outflow that is Anil Agarwal’s cash cow.
Subject to regulatory permissions, Hindustan Zinc, a mining company with headquarters in Rajasthan, India, announced in an exchange filing that it will gradually acquire the assets of THL Zinc Ltd. Mauritius from its parent company over a period of around 18 months.
Why it matters: The billionaire owner of Vedanta, Agarwal, needs to make the transaction in order to decrease debt at Vedanta Resources following a failed attempt to delist Vedanta Ltd. in 2020 and to simplify the corporate structure of his commodities firm.
The deal can aid upstreaming of cash from the unit, deliver gains on higher valuations and the structuring avoids long-term capital gains tax.
Backdrop: According to information gathered by Bloomberg, Vedanta Resources has $4.7 billion in dollar bonds maturing over the next four years, with $900 million in notes due in the first half of 2023.
Vedanta owns about 65 percent of the miner and the Indian government holds about 30 percent.
The big picture: According to a report with the exchange, the company's total gross investments, cash, and cash equivalents decreased during the preceding few quarters and stood at 164.82 billion rupees ($2.03 billion) as of the end of December.
The costly acquisition of the international zinc assets would run down cash reserves at Hindustan Zinc
The numbers: Shares of Vedanta Ltd. advanced as much as 3 per cent in Mumbai Friday, while Hindustan Zinc slumped as much as 9.9 per cent.
The company’s total gross investments and cash and cash equivalents have eased in the past few quarters and were at 164.82 billion rupees ($2.03 billion) as of December’s end, an exchange filing showed.
Read in short: In order to gain from a dividend outflow, Vedanta Ltd. announced plans to sell Hindustan Zinc Ltd. its international zinc operations for $2.98 billion.