Hindustan Zinc Restructuring: Is It Headed For A Three-Way Vertical Split?

Hindustan Zinc Ltd. may be looking at spinning off its businesses into three or four separately listed companies, following the planned restructuring at Anil Agarwal-promoted parent Vedanta Ltd.

The board of the company on Sept. 29 authorised the committee of directors to evaluate corporate restructuring exercise to unlock shareholder value, the company said in a disclosure to stock exchanges.

The move may follow Vedanta's spinoff plan to create six listed companies, each managing separate verticals and with independent boards and managements. That demerger will be a vertical split, giving each shareholder one share in each of the six entities for every one held in Vedanta.

While the committee is yet to submit its details to the board on Hindustan Zinc, the management hinted it may take a similar route.

The Hindustan Zinc board met on Friday and considered a strategic review to look at if "we can create a pure play commodities demerger, like the way we are doing in Vedanta, across lead and zinc and silver and recycle", said Ajay Agarwal, president-finance at Vedanta. "They are also considering to evaluate is there any opportunity to consider similar corporate action in something."

Agarwal said there are multiple structuring options possible. One is that three companies can be listed and the other could be subsidiarisation of each of those assets under Hindustan Zinc, he said. "Once the study is complete, we will get to know more about it."

If Anil Agarwal is looking to ring fence and derive shareholder value for each of the businesses, then vertical split could be one of the options for Hindustan Zinc.

It currently has three segments—zinc and lead; silver and renewable (wind energy). Zinc and lead vertical is the largest.