ICICI Securities, Axis Capital, 3 others to manage HZL stake sale

The government has zeroed in on five merchant bankers, including ICICI Securities, Axis Capital and Citi Group, to manage the Centre’s 29.53% residual stake sale in Hindustan Zinc (HZL) in the open market tranches, sources told FE.

The other bankers, which have been selected by the Department of Investment and Public Asset Management (Dipam), are HDFC Bank and IIFL Securities. Six bankers, which were shortlisted from the applicants, made their presentations before Dipam on August 12. Only SBI Caps has not been selected.

The share price of HZL ended at Rs 292.3 on the BSE on Tuesday, up 6.78% from the previous close. At current market prices, the Centre’s stake is worth about Rs 36,500 crore.

With the privatisation of BPCL now on the back-burner, the sale of the HZL stake may help boost the government’s non-debt capital receipts in FY23. So far during the current financial year, Rs 24,544 crore, or 38% of the annual disinvestment target of Rs 65,000 crore, has been achieved through the initial public offer of LIC, offers for sale (OFS) and buyback of shares.

The government is looking at garnering more disinvestment receipts in the current financial year, as it tries to step up capex and meet additional subsidy costs totalling about Rs 2 trillion.

The selected merchant bankers would assist with the timing of the disinvestment of the HZL stake through OFS, get investor feedback and hold investor roadshows, as well as help in securing regulatory approvals.

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As per a Supreme Court order dated November 18, 2021, the Centre can sell its residual stake in HZL in the open market under Sebi rules. Recently, the Centre and Vedanta, the promoter of HZL, had mutually decided to end an arbitration concerning the second call option demanded by Vedanta in the residual stake sale.

In 2002, Vedanta (earlier known as Sesa Sterlite) bought a 26% stake in HZL, India’s largest zinc/lead miner. It exercised the first call option in 2003 and acquired an 18.9% additional stake in HZL. Vedanta later acquired another 20% stake in the company through an open offer, increasing its shareholding to 64.92%.