“Hindustan Zinc shares drop 8% as Vedanta increases its stake sale via Offer for Sale (OFS) to 3.17%, aiming to raise ₹6,500 crore. The OFS is priced at ₹486 per share, offering a 15% discount.”
Hindustan Zinc shares tumbled nearly 8% on August 16, 2024, after Vedanta increased its stake sale through an Offer for Sale (OFS) to 3.17% of total equity.** The OFS is priced at ₹486 per share, offering a 15% discount to Hindustan Zinc’s previous closing price, and aims to raise approximately ₹6,500 crore.
Impact on Bharat Zinc Ltd Share Price
The stock of Hindustan Zinc, which also trades under Bharat Zinc Ltd share price, witnessed a significant decline, hitting an intraday low of ₹528. This marks a 35% drop from its peak of ₹807 in May 2024. Despite recent downturns, the stock remains over 85% above its 52-week low of ₹285 recorded in March 2024.
Vedanta’s Strategic Move and Debt Management
Vedanta initially planned to sell 11 crore shares but increased this to 13.3 crore shares, equivalent to 3.17% of Hindustan Zinc’s equity. The sale follows reports that Vedanta is seeking to raise $2.5 billion to manage its substantial debt, which, as of June 2024, includes Hindustan Zinc’s ₹11,178 crore portion. This move comes after Vedanta paused plans to sell its steel business and raised ₹8,500 crore through a Qualified Institutional Placement (QIP) of shares.
Dividend and Financial Performance
Hindustan Zinc, India’s largest zinc producer, is currently cash positive and has a strong dividend history. The company announced an interim dividend of ₹4,225 crore in May 2024, with the board scheduled to meet on August 20 to consider a second interim dividend. Additionally, there are considerations for a special dividend payout of ₹8,000 crore for the current fiscal year.
Market Reaction and Outlook
The announcement of the increased OFS by Vedanta led to a sharp drop in Hindustan Zinc’s share price, reflecting investor concerns over the impact of the sale on the company’s stock value. However, the long-term outlook for Hindustan Zinc remains robust, given its solid financial performance and strategic importance within Vedanta’s portfolio.
Retail investors will have the opportunity to participate in the OFS on Monday, August 19, while non-retail investors began subscribing on Friday. The outcome of this sale will be closely watched by market participants, particularly those tracking Vedanta stock and Hindustan Zinc’s dividend announcements.
Regulatory and Investor Sentiment
The increase in Vedanta’s stake sale through the Offer for Sale (OFS) has sparked a broader conversation about regulatory oversight and investor sentiment in the Indian stock market. Analysts are closely monitoring the impact of such large-scale equity sales on market stability and investor confidence. The regulatory framework governing OFS transactions is designed to ensure transparency and fairness, yet the sharp drop in Hindustan Zinc’s share price raises questions about market resilience and the potential effects on long-term investment strategies. With Vedanta’s move potentially influencing other major transactions and investor behaviors, the market will be keenly observing any subsequent regulatory responses or policy adjustments aimed at maintaining investor trust and market stability.
