INDIAN billionaire Anil Agarwal’s plan to trim a massive debt pile hit a roadblock after the government threatened to take legal action to stop his Vedanta Group from selling its zinc manufacturing unit. The initial plan was for the founder to sell THL Zinc Mauritius to Vedanta subsidiary Hindustan Zinc, which is around 30 per cent state-owned, but the move to block the sale has now thrown a spanner in the works to use the proceeds from the sale to trim Vedanta Resources’ debt. S&P Global Ratings flagged earlier this month that the company’s debt scores may “come under pressure” if it is unable to raise US$2 billion or sell its international zinc assets.

Hindustan Zinc agreed in January to buy the unit, THL Zinc Mauritius, from its parent for US$3 billion in phases over 18 months. The government said at the time that it was planning to oppose it.

Government representatives on Hindustan Zinc’s board have argued against the plan, and “will explore all legal avenues available” if the company decides to proceed, New Delhi said in a letter to the company on Friday (Feb 17), a copy of which was posted on stock exchanges on Monday.

Hindustan Zinc said in a separate filing on Monday that it would place the letter before the board, and that a meeting of the shareholders to approve the deal had yet to be called. 

The company, based in the state of Rajasthan, has long been a cash cow for Agarwal, who has squeezed money from it in the form of dividends through the years, with the latest proposed transaction viewed as another way of extracting more funds.

Hindustan Zinc’s total gross investments and cash equivalents have fallen about 21 per cent from the beginning of April 2022 to 164.8 billion rupees (S$2.7 billion) at the end of the year, exchange filings showed. Vedanta Resources, meanwhile, has bonds worth US$4.7 billion maturing in the next three-and-a-half years, as indicated by data compiled by Bloomberg. BLOOMBERG

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