Indian government may delay its decision to sell its stake in Hindustan Zinc until a turnaround in the sector’s fortunes, following the advise of merchant bankers, two government sources told Reuters.
However, one of the sources told Reuters that the government is still hoping to complete the long-delayed sale this fiscal year.
The government intends to sell its over 29% stake in instalments, beginning with the sale of around 5% of the total. A 64.9% stake belongs to Vedanta Group.
Due to a steep drop in zinc prices and Vedanta’s attempt to sell two units to the miner, Hindustan Zinc’s stock price has fallen nearly 16% from its January highs.
According to the Reuters report, the first official stated that the government is waiting for the share price to recover.
“Merchant bankers have advised against a sale offer at the moment as institutional investors are presently not keen to invest in the metals sector,” the official said. The advice came after road shows were conducted in June, according to Reuters report.
As they are not authorised to speak to the media, both officials spoke on the condition of anonymity. The news article stated that the Ministry of Finance did not reply to emails from Reuters.
According to a report from rating agency ICRA last month, global macroeconomic uncertainty and a sluggish rebound in Chinese demand have caused a 30% correction in zinc prices over the past six months.
It also stated that this year’s expected growth in world consumption of aluminium, copper, and zinc would be modest.
Moreover, the nation’s highest court rejected Vedanta’s request to pressure the government to sell its interest in Hindustan Zinc last week.
During the previous fiscal year, the government had intended to sell around 5% of its stake in Hindustan Zinc, but it postponed the sale since prices fell after the miner announced in January that it would acquire two of Vedanta’s zinc subsidiaries.
The deal was rejected by the government, and it ultimately ended a few months later.
According to a report by Reuters, institutional or big investors told government officials even during roadshows in December that they were not interested in purchasing sizable holdings in Hindustan Zinc.