New Delhi: Government nominees on the Hindustan Zinc Ltd (HZL) board will likely quiz the management on the company's dealings with its promoter Vedanta Ltd and other related parties at the next board meeting on July 17, people aware of the development said.
The government had a 27.92% stake in HZL while Anil Agarwal-controlled Vedanta Ltd held 61.84% as of June 30.
"The idea (behind asking fresh questions to the HZL management) is not to doubt the company's financial position or cast aspersions but to be reassured of its corporate governance practices and other financial and operational aspects," one of the persons cited above told ET.
The move comes in the aftermath of short-seller Viceroy Research accusing Vedanta's parent entity Vedanta Resources this month of being a "parasite" running a "ponzi scheme" that has "pushed the entire group to the brink of insolvency."
Vedanta has called the claims a "false propaganda" based on information already available in the public domain and asserted that "the authors have tried to sensationalise the context to profiteer from market reaction."
The US-based short-seller has also questioned HZL's payment of about Rs 1,560 crore in "brand and strategic services" fees to Vedanta, adding that this was without commercial justification.
In response to ET's queries, an HZL spokesperson said "'Vedanta' is a prominent global brand in the natural resources sector and the brand is a registered intellectual property of Vedanta Resources. Vedanta Ltd, HZL and other group companies use the brand under a brand license/sub-license agreement and pay a board-approved brand and strategic services fee for its usage."
"This structure reflects a standard intercompany licensing model used globally by diversified groups and is fully compliant with Indian accounting, tax and governance regulations, and follows internationally accepted practices," the spokesperson added.
Asked if the company intends to explain its stance on the Viceroy Research report to the government nominees in the July 17 board meeting, the spokesperson said as a policy, the company "does not disclose the agenda or discussion points of upcoming board meetings."
"Outcomes of such meetings, as required, will be communicated through appropriate channels post conclusion."
Another person said nominees of minority shareholders asking questions at a company's board meeting on emerging issues is a legitimate practice and "there is no reason why the government wouldn't do that."
The HZL board has three government nominated directors.
The government had a 27.92% stake in HZL while Anil Agarwal-controlled Vedanta Ltd held 61.84% as of June 30.
"The idea (behind asking fresh questions to the HZL management) is not to doubt the company's financial position or cast aspersions but to be reassured of its corporate governance practices and other financial and operational aspects," one of the persons cited above told ET.
The move comes in the aftermath of short-seller Viceroy Research accusing Vedanta's parent entity Vedanta Resources this month of being a "parasite" running a "ponzi scheme" that has "pushed the entire group to the brink of insolvency."
Vedanta has called the claims a "false propaganda" based on information already available in the public domain and asserted that "the authors have tried to sensationalise the context to profiteer from market reaction."
The US-based short-seller has also questioned HZL's payment of about Rs 1,560 crore in "brand and strategic services" fees to Vedanta, adding that this was without commercial justification.
In response to ET's queries, an HZL spokesperson said "'Vedanta' is a prominent global brand in the natural resources sector and the brand is a registered intellectual property of Vedanta Resources. Vedanta Ltd, HZL and other group companies use the brand under a brand license/sub-license agreement and pay a board-approved brand and strategic services fee for its usage."
"This structure reflects a standard intercompany licensing model used globally by diversified groups and is fully compliant with Indian accounting, tax and governance regulations, and follows internationally accepted practices," the spokesperson added.
Asked if the company intends to explain its stance on the Viceroy Research report to the government nominees in the July 17 board meeting, the spokesperson said as a policy, the company "does not disclose the agenda or discussion points of upcoming board meetings."
"Outcomes of such meetings, as required, will be communicated through appropriate channels post conclusion."
Another person said nominees of minority shareholders asking questions at a company's board meeting on emerging issues is a legitimate practice and "there is no reason why the government wouldn't do that."
The HZL board has three government nominated directors.
