News Mania Desk/Agnibeena Ghosh/16th August 2024
Hindustan Zinc Ltd (HZL) witnessed a significant drop in its stock value, plunging by 8% during Friday’s trading session. This sharp decline was triggered by its promoter, Vedanta, initiating a two-day offer-for-sale (OFS) to divest up to 3.17% of its stake in the company. The OFS is scheduled to run from August 16 to August 19, with the floor price set at ₹486 per share. This price is notably 15.17% lower than Wednesday’s closing price of ₹572.95 on the BSE, causing concern among investors and leading to the sharp fall in HZL’s share price.
The offer-for-sale involves Vedanta proposing to sell up to 5,14,40,329 shares, which represents 1.22% of Hindustan Zinc’s total issued and paid-up share capital. This initial phase of the sale was specifically aimed at non-retail investors on August 16, 2024. For retail investors, the opportunity to participate in the OFS will be available on August 19. Additionally, if any bids from non-retail investors remain unallocated on Friday, they can be carried forward to the Monday session. To accommodate potential oversubscription, Vedanta has the option to sell up to 8,23,04,527 additional shares, which amounts to 1.95% of Hindustan Zinc’s share capital.
If Vedanta decides to exercise this oversubscription option, the total number of shares sold could reach 13,37,44,856, representing 3.17% of Hindustan Zinc’s total share capital. This substantial divestment by Vedanta had an immediate impact on HZL’s stock, with its share price dropping by 7.8%, reaching a low of ₹528 on the BSE. In contrast, Vedanta’s shares experienced a slight increase of 1.39%, climbing to ₹425.90.
Vedanta’s decision to sell a portion of its stake in Hindustan Zinc is believed to be part of its broader strategy to raise funds for various purposes. These could include growth and expansion initiatives, as well as optimizing the company’s capital structure. By offloading shares, Vedanta is likely looking to bolster its financial position, possibly to reduce its debt or finance new projects.
Adding to the context, a report from PTI suggests that Hindustan Zinc is considering a special dividend payout of ₹8,000 crore for its shareholders in the current financial year. The company’s board is expected to meet on Tuesday to discuss and potentially approve this dividend payout. Such a special dividend would not only benefit general shareholders but would also be particularly advantageous for Vedanta Ltd, which holds approximately 65% of Hindustan Zinc.
Should the special dividend be approved, Vedanta could receive around ₹5,100 crore from the payout. This substantial inflow of funds could then be utilized by Vedanta to reduce its existing debt, further strengthening its financial standing. The anticipation of this special dividend, coupled with the ongoing OFS, has created a complex market environment for Hindustan Zinc’s shares, resulting in the observed volatility.
In summary, the decline in Hindustan Zinc’s share price can be directly attributed to Vedanta’s significant offer-for-sale, which has introduced uncertainty among investors. However, the potential for a substantial dividend payout may provide some long-term support to the stock as investors weigh the immediate impact of the OFS against future financial benefits.
