Shares of Hindustan Zinc were tumbling on Friday on reports that the company’s parent firm, Vedanta Ltd, is looking to offload a larger portion of its stake in the firm via an offer for sale (OFS) at a discount. Hindustan Zinc is also reportedly planning to announce a large special dividend to shareholders.
What Happened: Anil Agarwal-owned Vedanta has unveiled plans to sell up to a 3.31% stake in Hindustan Zinc through an offer for sale (OFS) issue, scheduled from August 16 to 19 — this is higher than the 2.6% stake sale it had previously announced. The floor price for the OFS has been set at ₹486 per share, which is a 15% discount to its last trading price.
Hindustan Zinc has had a strong performance, recording its highest-ever annual refined zinc production in FY24 and holding a 75% market share in the primary zinc market. The company operates the world's largest underground zinc-lead mine in India and has linked the demand for zinc with India’s steel production growth.
Despite the stock’s strong performance so far this year, the company reported a debt of ₹11,178 crore as of June 30, contributing to Vedanta Group’s consolidated debt of ₹78,016 crore.
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Big Payout: Hindustan Zinc, a unit of the Vedanta Group, is planning a special dividend payout of ₹8,000 crore to its shareholders for the current fiscal year, PTI reported, citing sources. The company’s board is scheduled to meet on August 20 to finalise the approval of this special dividend.
This special dividend comes after the National Company Law Tribunal (NCLT) recently approved the transfer of ₹10,383 crore from Hindustan Zinc’s general reserves to retained earnings. The special dividend will be in addition to the company's regular annual dividend of around ₹6,000 crore.
About 30% of the special dividend, around ₹2,400 crore, will be allocated to the Indian government, contributing to its non-tax revenues for the fiscal year, the news wire reported. The government holds a 29.5% stake in Hindustan Zinc and will receive this payout alongside other shareholders.
Promoter Vedanta Ltd, which owns around 65% of Hindustan Zinc, is expected to gain about ₹5,100 crore from the special dividend. Vedanta is anticipated to use this amount to further reduce its balance sheet leverage.
Price Action: Hindustan Zinc’s share price was down 5.08% at ₹542.70 near the start of trade on Friday. Shares of Hindustan Zinc have surged by 84% this year, effectively doubling the company’s market capitalisation during the June quarter.
Meanwhile, Vedanta’s share price was up 1.09% at ₹424.80 in early trade on Friday.
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