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Informist, Thursday, Jul 18, 2024

MUMBAI – The Jaipur bench of the National Company Law Tribunal has approved moving Hindustan Zinc Ltd's reserves of 104 bln rupees to retained earnings. This would allow unrestricted use of funds, including making payouts to investors in the form of dividend, BSE had told NCLT earlier, as per the order.

"The company (Hindustan Zinc) is of the view that the funds represented by the general reserves are in excess of the company's anticipated operational and business needs in the foreseeable future, thus, these excess funds can be utilised to create further shareholders' value...," Hindustan Zinc told the tribunal.

Now, Hindustan Zinc may consider giving special dividend to its shareholders. Hindustan Zinc is a subsidiary of Vedanta Ltd, with neearly 64.9% stake, and the government holds 29.5%.

If Hindustan Zinc approves special dividend by using the retained earnings of nearly 104 bln rupees, Vedanta is likely to get nearly 63.78 bln rupees, according to media reports. This is equivalent to 25 rupees per share.

In May, Hindustan Zinc had announced dividend of 10 rupees per share. The latest, if announced, will be treated as special dividend. If all goes well, Vedanta Ltd may transfer its dividend money received from Hindustan Zinc to its parent Vedanta Resources and use it to repay part of its debt.

On May 16, Vedanta had said it planned to raise up to 85 bln rupees through a qualified institutional placement of equities. The issue opened on Monday, and was priced at 461.26 rupees a share.

Vedanta and the government have engaged in a tussle after the board of Hindustan Zinc approved to buy Vedanta group's zinc business for $2.98 bln. Vedanta had planned to repay the debt by selling its zinc business to its arm, which has robust cash reserves. Being the largest minority shareholder, the government blocked Vedanta's efforts to use Hindustan Zinc reserves in any form. Though the dispute ended in 2022, the classification of cash reserves was pending before the tribunal.

At 1134 IST, shares of Hindustan Zinc were down 1.3% at 653.45 rupees on the National Stock Exchange and those of Vedanta were down 0.7% at 452.25 rupees.  End

US$1 = 83.60 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Narayana Krishna and Anshul Choudhary

Edited by Avishek Dutta

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