The low float Hindustan Zinc stock came into trading limelight as the company said its board would consider sub-division of existing scrips of Rs 10 each and issue of bonus shares at its meeting on January 19.

According to market circles this is considered to be a move by Vedanta to keep the minority shareholders in good humour. Minority shareholders constitute just 5.54 per cent of voting rights. Vedanta group holds 64.92 per cent and the Government of India (GoI) still owns 29.54 per cent stake in this once state owned company.

“The Government has serious reservation about the ways Vedanta group runs the company. Recently it has not given HZL permission to acquire mines abroad, which forced Vedanta to acquire one of the three targets through Sterlite Industries,” said the CIO of an Europe-based fund.

The Union Mines Ministry sources told Business Line that Vedanta had recently been communicated that the Government nod on the proposed overseas acquisitions, sought earlier, would not be available.

The Government has objected to using the cash rich HZL's resources (around Rs 10,000 crore) to the serve the interests of the promoter group. HZL had proposed acquisition of three zinc ore bearing mining assets from the global major Anglo American. The total cost was to be around $707 million involving full acquisition of Skorpion mine in Namibia and Lisheen mine in Ireland, and 74 per cent of Black Mountain Mining in South Africa.

Since HZL did not obtain the approval of GoI, Vedanta acquired Skorpion through Sterlite Industries, for which the deal had lower synergistic value than HZL.

Edelweiss in a note last month said: “The consummation of the transaction through Sterlite Industries, instead of HZL, is a surprise. Skorpion has advantages of low cash cost, and the valuation is low at EV/EBITDA of only 3.5-4.0x (assuming flat volumes). However, the low mine life of only six years is a concern; synergy benefits are not clear at this stage.”

The brokerage further commented that according to Sterlite management, the rest of the transaction was to be completed within 6 months. “It is unclear whether on receipt of approval from GoI this asset would be transferred to HZL as originally intended,” the analysts of Edelweiss pontificated.

HZL on Tuesday hit its 52-week high and closed with a gain of 3 per cent on the BSE and NSE.