The government is likely to oppose a plan by Hindustan Zinc to buy out Vedanta's global zinc assets unless the valuation of the assets is brought down to "more realistic levels", The Economic Times reported citing a senior government official.
The Hindustan Zinc had proposed to buy Vedanta's global zinc assets in a cash deal worth $2.98 billion which the government had opposed.
The government in February opposed Vedanta Ltd's proposal to sell its international zinc business to Hindustan Zinc Ltd for $2.98 billion over concerns of valuation.
The government had threatened to take legal action to stop the sale of the Africa-based assets to HZL, in which it holds a 29.54 per cent stake.
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In a letter to HZL, posted by the company to stock exchanges, the Ministry of Mines said the deal is a "related party transaction" and the government would "like to reiterate'' its dissent.
HZL in January agreed to buy THL Zinc Ltd Mauritius from its parent, Vedanta Ltd, for $2.98 billion in phases over 18 months.
Currently, government of India owns 29.54 per cent stake in Hindustan Zinc and 64.92 per cent is owned by Vedanta Limited. The entity was privatised two decades ago.
The government had previously warned Vedanta of legal action if it proceeded with transaction and even wrote Sebi reinforcing its position.
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"Even though the government is willing to examine any non-cash deal option (presented by HZL), the main issue of high valuation still remains. We are not comfortable with this sort of valuation," The Economic Times quoted a senior official aware of the details as saying.
