Hindustan Zinc Shares Plummet as Vedanta Launches Discounted Offer For Sale; Vedanta Eyes Strategic Expansion

Shares of Hindustan Zinc Ltd. (HZL) experienced a steep decline of 7.8% on Friday, reaching a day’s low of Rs 528 on the Bombay Stock Exchange (BSE). This drop followed the opening of Vedanta Ltd.’s offer for sale (OFS), which was introduced at a discounted floor price of Rs 486. The mining conglomerate, Vedanta, which holds the position of promoter for HZL, has initiated the sale of up to 3.31% of its stake, translating to 14 crore shares. This sale is scheduled to take place from August 16 to August 19.

In contrast to HZL’s downturn, Vedanta’s shares were trading 2% higher at Rs 430 on the BSE. The company is expected to raise approximately Rs 6,498 crore from the OFS at the established floor price.

OFS is structured into two phases

The OFS is structured into two phases. On Friday, Vedanta is offering up to 5,14,40,329 equity shares, representing 1.22% of HZL’s equity share capital, exclusively to non-retail investors. Should there be an oversubscription, the remaining 8.23 crore shares, which represent 1.95% of the equity share capital, will be available for purchase by both retail and non-retail investors. The offer will reopen for retail investors and non-retail investors who opt to carry forward their unallotted bids on Monday, August 19.

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Explaining the rationale behind the OFS, Hindustan Zinc stated, “The Offer is being undertaken by the seller, inter-alia, to gain access to funds for inter alia growth and expansion purposes and for optimisation of the capital structure of the company.”

As of the end of the June quarter, Vedanta held a 64.92% stake in HZL, while the Indian government owned 29.54%. Vedanta has outlined plans to demerge its key business segments—aluminium, oil and gas, power, base metals, and iron and steel—into separate listed entities. This strategic move is aimed at reducing refinancing risks and lowering dependence on dividends from Vedanta Resources Ltd.

Vedanta’s financial position as of June 30, 2024, reveals a net debt of Rs 61,324 crore. The company has been active in managing its financial resources, having raised Rs 8,500 crore (over $1 billion) last month through a Qualified Institutions Placement (QIP) of 19.31 crore equity shares at an issue price of Rs 440 per share.

National Company Law Tribunal (NCLT)

In a related development, Hindustan Zinc is anticipated to declare a special dividend of Rs 6,000 crore to its shareholders this month, as recently reported by ET. Additionally, the National Company Law Tribunal (NCLT) granted approval last month for the transfer of Rs 10,383 crore from the company’s general reserves to retained earnings.

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