Hindustan Zinc dips 4% as Vedanta board okays 2.6% stake sale via OFS

Meanwhile, Hindustan Zinc has dismissed rumours of Rs 6,000 crore worth special dividend.

Share of Hindustan Zinc (HZL) dipped 4 per cent to Rs 556.35 on the BSE in Wednesday's intra-day trade after the parent firm Vedanta informed exchanges that its board approved the sale of up to 110 million shares or 2.6 per cent equity in the zinc maker via an offer for sale (OFS).

In an exchange filing, Vedanta said the duly authorized committee of directors of Vedanta at its meeting held Tuesday on August 13, 2024, has approved the sale of upto 110 million equity shares of HZL, representing 2.60 per cent of the issued and paid-up equity share capital of HZL, by way of an offer for sale through the stock exchange mechanism.

As on June 30, 2024, Vedanta, the promoter of HZL, held 64.92 per cent stake in the company, the shareholding pattern data shows. The government of India held 29.54 per cent stake, while Life Insurance Corporation of India held 2.76 per cent holding in HZL.

Meanwhile, in the past two trading days, the stock price of HZL has slipped 9.5 per cent after the company clarified on reports of Rs 6,000 crore special dividend and said it was 'unable to comment' on this speculation and that no such proposal has been submitted to the board of directors for consideration.

At 09:48 am; HZL was trading 2 per cent lower at Rs 568.70, as compared to 0.2 per cent gain in the BSE Sensex. Meanwhile, Vedanta has gained 0.7 per cent at Rs 425. 

With the past two days decline, the HZL stock has corrected 31 per cent from its 52-week high of Rs 807 touched on May 22, 2024. Thus far in the calendar year 2024, the stock has zoomed 78 per cent, as against 9.5 per cent rise in the benchmark index.

HZL released a statement on Monday addressing recent media reports suggesting that the company is expected to declare a special dividend amounting to Rs 6,000 crore this month.

In an exchange filing on Monday, the company said, “It may be noted that any such kind of decision is under the power of the Board of Directors (‘Board’) of the Company, and the Company has not yet submitted any such proposal to the Board.”

HZL, a Vedanta Group company, is the world's second-largest integrated zinc producer and the third-largest silver producer. The company supplies to more than 40 countries and holds a market share of about 75 per cent of the primary zinc market in India.

HZL has a robust free cash flow from operations of Rs 3,432 crore pre capex of Rs 1,000 crore (including growth capex of Rs 291 crore) and RE power investment of Rs 230 crore for Q1FY25 contributing to a healthy balance sheet with AAA credit rating.