(Bloomberg) -- The Indian government is planning to oppose Hindustan Zinc Ltd.’s proposal to buy global zinc assets of Vedanta Ltd. for $2.98 billion, people familiar with the matter said.

The government, which has nearly 30% stake in Hindustan Zinc that it intends to sell through offer-for-sale mechanism, is likely to vote against the plan on concerns ranging from high valuations to it being a related party transaction, the people said, asking not to be named as the information is not public. 

The plan was pushed through even after government officials refused to approve it, they said, adding the government is trying to nudge Hindustan Zinc to withdraw the proposal. 

This could potentially make it harder for billionaire Anil Agarwal to use proceeds from the sale to trim debt at ultimate parent Vedanta Resources Ltd., which has bonds worth $4.7 billion maturing in the next three-and-a-half years, according to data compiled by Bloomberg. 

Hindustan Zinc last month agreed to buy assets of THL Zinc Ltd. Mauritius from its parent in a phased manner over 18 months. The operations of THL include Black Mountain Mining (Pty) Ltd. in South Africa and Skorpion Zinc (Pty) Ltd. in Namibia.

Television channel CNBC-TV18 reported the government’s plan to oppose the deal earlier Monday.

Emails sent to Hindustan Zinc and Vedanta were not immediately answered, while a spokesperson for the finance ministry didn’t respond to calls and a text message seeking comments. 

Analysts have flagged the costly acquisition would run down cash reserves at Hindustan Zinc in which Vedanta holds about 65%. The unit has been regularly doling out dividends to the parent, helping it further push up cash to Vedanta Resources.


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