Metals and mining conglomerate Vedanta Ltd has pledged its entire shareholding in subsidiary Hindustan Zinc Ltd (HZL) to help fund its proposal to delist from the stock exchanges.

An exchange filing by HZL on Saturday showed that Vedanta, the majority owner of the company, had created an encumbrance on its entire shareholding of 64.92% through the share pledge and non-disposal undertaking in favour of SBICap Trustee Co. Ltd. The transaction includes about 2.1 billion shares by non-disposal undertaking and 6.26 billion shares in pledge, according to the filing.

The covid-19 pandemic and the resulting economic slump that sent stock prices plummeting has brought on a wave of voluntary delisting proposals as promoters try to buy back shares cheap. In the last three months, majority owners of Adani Power and Hexaware Technologies have also proposed buying out all publicly-traded shares of their companies, while delisting rumours have swirled around Diageo’s United Spirits, the Indian arm of US-based IT firm Oracle.

On 12 May, Vedanta Ltd had announced its holding company’s intention to delist the Indian business. The holding company, Vedanta Resources Ltd, has proposed to acquire fully paid-up equity shares of the company that are held by public shareholders at an indicative offer price of 87.5 per share.

The proposed delisting is part of billionaire and Vedanta Resources founder and chairman Anil Agarwal’s plan to simplify his investments across a multi-tiered corporate structure. On 20 August, Vedanta Resources said it raised $1.75 billion through bridge loans and another $1.4 billion through the sale of bonds earlier in the month.

Agarwal has a track record of merging and delisting companies. In 2012, he merged mining firms Sterlite and Sesa Goa Iron Ore to form Vedanta. After buying out Cairn, Vedanta set in motion the delisting of the cash-rich Cairn India in 2016, and merging it with itself. In 2018, Vedanta Resources was also delisted from the London Stock Exchange.

The company said the delisting of Vedanta from the BSE and the NSE will simplify its corporate structure and give it more financial and operational flexibility. Earlier this year, Vedanta was looking for an energy partner to sell a minority stake in Cairn India, but the plans were shelved after the crash in global crude oil prices in the aftermath of the coronavirus outbreak brought down Cairn’s valuations of its oil blocks.

In FY20, Vedanta Ltd reported a net loss of 4,743 crore, compared to the net profit of 9,698 crore that it reported in the previous fiscal. The company took a massive write-off of 17,132 crore on impairment of assets in oil and gas, copper, and iron ore businesses in the fourth quarter because of a commodity market slump due to the covid-19 pandemic.


News Source: Livemint


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