Disinvestment Hit By Hindustan Zinc Logjam, IDBI Bank Sale May Be Delayed

The sale of 29.54% stake in Hindustan Zinc Ltd. is unlikely to be completed in this fiscal, according to a senior official with knowledge of the matter, who spoke on condition of anonymity.

The Union government is staring at a divestment target of Rs 50,000 crore for the current fiscal, according to estimates, which were revised downwards from the originally budgeted Rs 65,000 crore. Currently, the divestment proceeds stand at Rs 31,107 crore in 2022–23 (which is 62% of the revised target).

A PTI report said the stake sale in HZL is likely only after clarity is received on the overseas zinc asset transfer and minority stakeholder concerns are addressed. It reported that a cashless asset transfer was possible as it is a related-party transaction.

Earlier in January, Vedanta Group had announced its intention to sell its Zinc International assets to listed subsidiary HZL, according to an exchange filing. Vedanta owns 64.9% in the company, while the government holds a shareholder stake of 29.54%.

Regarding the IDBI transaction, the official quoted above said the second stage of financial bids might take longer than initially stated. The financial bids are likely to be pushed to the next fiscal as there is no rush to complete the process, the official said.

The IDBI transaction is the first banking disinvestment process, which would pave the way for the disinvestment of two government banks announced in the previous budget.

A cumulative 60.72% stake—owned by the government and Life Insurance Corp.—is on the disinvestment block. The government and LIC currently own 45.48% and 49.24%, respectively.

Dividend receipts by the government have been positive and have crossed the Rs 50,000-crore mark for the second year in a row, according to Department of Investment and Public Asset Management.

Dividend receipts from central public sector enterprises in the current fiscal stand at Rs 50,376 crore against a revised estimate target of Rs 43,000 crore. In the previous fiscal, the dividend receipts reached Rs 59,294 crore.

In an earlier conversation with BQ Prime, DIPAM Secretary Tuhin Kanta Pandey said that divestment and dividends must be considered together. "...Dividend and disinvestment, to some extent, have to be looked at together because so long as we are not able to disinvest, we do have our equity giving us returns in the form of dividend."

Disinvestment hinges on a set of factors such as market conditions, domestic and global economic outlook, geopolitical factors, investor interest and administrative feasibility, the Finance Ministry told the Rajya Sabha in a parliamentary response on Tuesday.

"During the last few years, there have been serious uncertainties in economic and market environment owing to Covid pandemic, global economic turmoil and geopolitical tensions affecting the disinvestment process and disinvestment receipts," said Bhagwat Karad, Minister of State for Finance.

In the previous fiscal, the government fell short of the disinvestment target, achieving only 17% of the revised target. It garnered Rs 13,534 crore out of the Rs 78,000 crore target for FY22.