The Indian government, Hindustan Zinc's largest minority shareholder, has rejected the miner's proposal to split into different units as it is not convinced such a move would boost shareholder value, a government official said on Friday.
"Whatever report we have in front of us, we are not convinced by it," said VL Kantha Rao, secretary at the Ministry of Mines, which administers Hindustan Zinc.
Last September, the company said it plans to create separate entities for its zinc, lead, silver and recycling businesses to unlock potential shareholder value.
But it did not consult the government, which has a 29.54% stake in the company, on the planned move, another government official told Reuters on the condition of anonymity.
The official also said the government was not convinced by Hindustan Zinc's rationale for the split and that the Ministry of Mines has lodged its objection with the company.
Hindustan Zinc CEO Arun Misra told Reuters the company had received the ministry's communication, which will be discussed with the board along with the management's observations.
However, Misra said he believes demerging the company to create a separate silver and zinc entity will help improve its market capitalisation, based on a report by a consultant.
A year back, the government had opposed Hindustan Zinc's proposal to buy two entities of Vedanta -- which has a 64.9% stake in Hindustan Zinc -- and forced the company to drop the plan.
