Hind Zinc Stake Sale: CBI Probe

By Research Desk
about 3 days ago

Hon'ble Supreme Court having ordered CBI enquiry in 26% stake sale of Hind Zinc (HZL), in the year 2002 by Govt of India, after hearing  Petitions filed, as Court goes by the arguments, facts and evidences placed before it, and does not leave any chance of criticism or justice having been not granted. It reminds us of Rafale Investigation ordered by SC as well in the past.

We wish to chronologically narrate the events, took place in this regard-

> Only 2 bidders were there in 2002 for HZL. Winner being Vedanta or Sterlite Group then, while loser being AV Birla Group or Hindalco.

> Vedanta bid were at Rs. 40.50 per share of HZL (Rs. 10 FV then), while Hindalco bid was couple of rupees lower. This also reminds us of Film Trishul, where Amitabh Bachchan outbid Sanjeev Kumar by Re. 1 in Land auction bids.

> 26% stake was sold by the Govt to Vedanta, in June 2002 quarter, which was followed by an open offer of 20% by Vedanta to non-promoter shareholders of HZL.  

> Vedanta raised their stake to 46 % in HZL, post this open offer, by September 2002 quarter. Open offer received over 22% shares tendered, against 20% required to obtain.

> Vedanta share price fell to as low as Rs. 14 - Rs.16, post this open offer, while there was not much buying interest of HZL share, then.

> Vedanta acquired further 18.92% in December 2003, pursuant to First Call Option, raising their stake to 64.92% in HZL, while presenting holding that stake since then.  

> Govt brought down its stake from 75.92% as at Mar 02, to 49.92% in June 2002, by selling 26% to Vedanta. Govt sold 1.17% in March 03 quarter and further 0.29% in September 03 quarter, to bring down its stake to 48.46%. In December 2003 quarter, sold 18.92% pursuant to call option to Vedanta, and brought down stake to 29.54%, while presently holding that stake since then.

> Hence, even Govt sold 1.46% in the year 2003, as they were non promoter of HZL, and found that HZL share price is correct to book its part stake, by selling it in the open market.

> In these last 19 years, HZL issued 1:1 Bonus and had gone for stock split to FV to Rs. 2 from Rs. 10. This had raised number of issued shares by HZL, 10x in 19 years, in the hands of each of its shareholder.

> 19 years back, with HZL stake sale, Govt then, also divested 26% stake in VSNL (now Tata Communication), with same process followed, but no one is raising finger on this.

> Even 51% stake was also sold in BALCO, by the Govt, then in 2002 (an unlisted arm) to Vedanta Group, but no one is raising finger on this as well.   


> M cap of HZL was at Rs. 1,750 cr in 2002, which is now at Rs. 1,38,00 crores. If we add dividend of Rs. 65.80 per share, paid by HZL in last 4 years alone (aggregate sum of Rs. 27,850 cr, from Nov 17 to Nov 21),  this valuation comes at over Rs. 1,66,000 cr. This does not include cash and cash equivalent of about Rs.30,000 cr held by HZL as at 30-9-2021. This means, Vedanta Group, raised valuation of HZL by about 112 times in these 19 years.

So, we should feel proud of Vedanta Group, by giving a Pat on their back, or go for witch hunting?

PSUs have generally been seen  never justifying their existence and have never seen such a mammoth wealth creation.

Even 29.54% stake of HZL, which is still held by the Govt, is having NPV of over Rs. 40,800 crore, which has been allowed by the Hon'ble SC, now, for monetization by the Govt. Para 38 of the SC Order refers on this explicitly as well.  

Also, all these stake sales in 2002, in HZL,  BALCO,  VSNL  were made under the leadership of Late Shri Atal Bihari Vajpayee, as PM of India, against whom, even Opposition parties have not been able to levy a single charge of Corruption till this date.

Irony is that Arun Shourie was Divestment Minister in 2002, who carried out these stake sales, but now seen making life miserable of the present Govt on other flimsy issues and charges. charges. Will this heat of CBI probe be felt by Shourie now?

KARMA theory also seen having playing out, now here. What you sow, you reap.

This is not a Buy or Sell recommendation, while stock recommendations are provided exclusively to our paid members in the Member Zone.

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