Vedanta increases its shareholding in Sesa Sterlite to 57% in quarter to June

London-based holding company Vedanta Resources increased its shareholding in metals and mining firm Sesa Sterlite by two percentage points to 57% in the quarter to June as it bought nearly 6.5 crore shares for about INR 1,700 crore.

Analysts said the timing of the transactions, soon after the Narendra Modi-led government took over at the Centre in May, indicates the company's confidence that the new government will clear the pending approvals that marred Sesa Sterlite's performance in the past three years.

If the approvals do come through, Sesa Sterlite can double production capacity in its zinc, iron ore and oil businesses in the next four to eight years, according to analysts.

Sesa Sterlite has been waiting for approvals for projects including iron ore mining in Goa, coal mining and 1,200 MW power plant for its subsidiary Balco, greenfield expansion for its zinc business in Hindustan Zinc and capacity expansion for oil production in Cairn. Sesa Sterlite is also eyeing cash in its subsidiary Hindustan Zinc that is currently not fungible due to the government's stake in the company.

At present, Sesa Sterlite has a 65% stake in the company while the Centre holds 29.5%. The company's management is hopeful that the new government will speed up the long-pending proposal of selling its stake. This will help it save significant interest on its INR 31,000 crore net debt as Hindustan Zinc has cash and current investments of INR 25,500 crore.

Sesa Sterlite paid an interest of INR 2,624 crore in 2013-14. With the recovery in global economy, zinc and aluminium prices have started rising after consolidating for several years, providing the company another reason to cheer. Zinc prices have risen 22% on an average over the past year while aluminium has become dearer by 10% on the London Metal Exchange.