Why Vedanta Shares Are Climbing After Hindustan Zinc's Board Meeting

Shares of both Vedanta Ltd and Hindustan Zinc soared after the latter’s board authorized a committee of directors to assess a potential corporate restructuring effort aimed at unlocking shareholder value.

What Happened: The plan involves establishing separate legal entities to manage the company’s zinc and lead, silver and recycling businesses, Hindustan Zinc said in an exchange filing.

The board outlined strategic objectives, including value enhancement for shareholders, the development of businesses better positioned to capitalise on their distinct market positions, and the formulation of appropriate capital structures and allocation policies based on each business’s unique needs.

External advisors will be appointed to assist in evaluating the available options, with the findings to be presented to the board of directors.

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Why It Matters: The restructuring plan could unlock value and help Vedanta, which holds a 64.9% stake in the subsidiary, service its massive debt load. Separating the businesses under different companies provides greater flexibility in deciding which ones to retain and which to sell. Additionally, for retail shareholders, this move eliminates the holding company discount, potentially unlocking significant value.

Approval from the board, including government nominees, is a prerequisite for any plan proposed by Hindustan Zinc. As of the June quarter’s shareholding pattern, the government holds a 29.54% stake in the company.

Earlier this year, Vedanta had announced its intention to transfer its international zinc assets to Hindustan Zinc for $2.98 billion, a move aimed at unlocking value, monetizing international zinc assets, and generating substantial synergies. However, this deal did not come to fruition.

Vedanta Chairman Anil Agarwal had previously cautioned that Hindustan Zinc’s fortunes might decline without the deal.

Price Action: Vedanta’s share price was up 6.6% at ₹222.10 in afternoon trade on Friday, while Hindustan Zinc’s share price climbed 4.03% to ₹309.95.

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