Tycoon Agarwal’s Plan to Trim Debt Hits a Roadblock in India

(Bloomberg) — Indian billionaire Anil Agarwal’s plan to trim a massive debt pile hit a roadblock after New Delhi said it would block the sale of a zinc manufacturing unit.

Most Read from Bloomberg

The government has threatened to take legal action to stop Agarwal’s Vedanta Group from selling the unit to its subsidiary Hindustan Zinc Ltd., which is around 30% state-owned.

The move throws a spanner in London-based Agarwal’s plan to use the proceeds from the sale to trim Vedanta Resources Ltd.’s debt. S&P Global Ratings flagged earlier this month that the company’s debt scores may “come under pressure” if it’s unable to raise $2 billion and/or sell its international zinc assets.

Hindustan Zinc agreed in January to buy the unit, THL Zinc Ltd. Mauritius, from its parent for $2.98 billion in phases over 18 months. The government said at the time 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, 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 and cash equivalents have fallen about 21% from the beginning of April 2022 to 164.82 billion rupees at the end of year, exchange filings show. Vedanta Resources, meanwhile, has bonds worth $4.7 billion maturing in the next three-and-a-half years, according to data compiled by Bloomberg.

(Updates with Hindustan Zinc’s comment in the 6th paragraph and rewrites throughout)