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Sesa Sterlite likely to merge Hindustan Zinc with itself

This article was posted on Jan 23, 2014 and is filed under Market News

Company could use latter’s cash and investments worth Rs 23,635 crore to pay debts, say bankers

Vedanta group, which is interested in buying the Indian government’s residual stake in Hindustan Zinc (HZL), is likely to merge the company with its India holding company, Sesa Sterlite, in the next financial year. The merger will give Sesa Sterlite, which already has a controlling stake in HZL, access to the latter’s cash and investments worth about Rs 23,635 crore, which it can use to pay off debts, say bankers.

Vedanta currently owns 55 per cent stake in Sesa Sterlite, which holds a 65 per cent stake in HZL. According to bankers, the group is currently debating the merger option internally and will take the final decision after the group buys the government stake.

Vedanta officials did not reply to emails seeking their views on the merger.

“Sesa would eventually want to de-list HZL and merge it with Sesa Sterlite thus improving the fungibility of cash flows. With a large minority shareholder with a board seat gone, the fungibility of HZL’s cash flows will improve Sesa Sterlite’s own balance sheet, which is stressed,” said a banker.

Source: Business Standard

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