Nilesh Shah on PSU privatisation: How Hindustan Zinc offers a lesson for IDBI Bank
Kotak AMC’s Nilesh Shah cited Hindustan Zinc as an example of how strategic divestment combined with a retained minority stake can create long-term national wealth. He said the government’s remaining stake is now worth over Rs 62,000 crore and expressed hope that IDBI Bank’s divestment would deliver similar value.
@FollowCII The case for Strategic Divestment One opposition against divestment is that family jewels are being sold.The experience of strategic divestment suggests that family jewels are being created for the next generation.Case in point is Hindustan Zinc Limited. Govt sold ~45% stake in Hindustan Zinc Limited , a loss making PSU along with management control to Vedanta Group two decades back for ~ Rs 769 crore. Govt. retained ~29% minority stake.That residual stake has delivered far more in dividends alone than the original sale proceeds. The minority stake is worth over Rs 62,000 crore plus The nation has benefited as HZL Capacity has multiplied (now world’s largest integrated zinc producer), production is up more than 4 X, silver production is up 15x, zinc imports have been replaced, FX is earned from exports, thousands of crore in taxes & royalties paid, thousands of jobs created & productivity improved substantially.Strategic sale + minority holding = Long term value creation for the nation.IDBI was a premier DFI, larger than ICICI in the 90s. ICICI went private and is valued at Rs 9.88 lac crore. IDBI stayed public, needed repeated capital infusions and is valued at Rs 90,000 crore. With the strategic sale of IDBI Bank now approved, hope it becomes as shining example as HZLAll the best to IDBI Bank strategic divestment. No stock recommendation. Please do your own research for your investment decision.
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