Hindustan Zinc shares nosedive 20% in 4 sessions; here’s why

Shares of Hindustan Zinc (HZL), a subsidiary of Vedanta, extended its losing streak for the fourth consecutive session on Monday, falling over 20% during this period. The metal and mining stock has been under stress since August 13 after Anil Agarwal-led Vedanta announced to sell a 3.17% equity stake in HZL through an offer for sale. The base offer size was 1.22% with an option to sell an additional 1.95% in case of oversubscription, representing 3.17% of the company's total issued and paid-up equity share capital. The floor price for the offer was fixed at ₹486.

On Monday, Hindustan Zinc shares dropped as much as 6% to ₹488.65, while the market capitalisation slipped to ₹2.09 lakh crore after the parent entity, Vedanta announced to further offload a 0.29% stake in the company via its ongoing OFS. Early today, the metal and mining stock opened lower at ₹490 against the previous closing price of ₹519.95 on the BSE.

The share price of Hindustan Zinc has corrected nearly 40% from its 52-week high of ₹807 touched on May 22, 2024. Despite the recent fall, the stock is up 71% against its 52-week low of ₹285 hit on March 15, 2024. In the last one year, HZL shares have given 57% returns to its shareholders, while it has risen nearly 60% in six months. In the calendar year 2024, the mining heavyweight surged 56%, while it lost nearly 23% in a month.

In an exchange filing on August 16, Hindustan Zinc said, “We wish to intimate the stock exchanges of our intention to exercise the oversubscription option in the offer to the extent of 1,21,65,562 equity shares (representing 0.29% of the total issued and paid-up equity share capital of the company) in addition to 5,14,40,329 equity shares (representing 1.22% of the total issued and paid-up equity share capital of the company) forming part of the base offer size.”

“Accordingly, the total offer size will be up to 6,36,05,891 equity shares (representing 1.51% of the the total issued and paid-up equity share capital of the company) of which 63,60,590 equity shares i.e. 10% equity shares of the offer would be reserved for allocation to retail investors on T+l day i.e. August 19, 2024, subject to receipt of valid bids, as part of the offer,” the release noted.

As per the company, the Offer was undertaken to gain access to funds for growth and expansion purposes and for optimisation of the capital structure of the firm.

The board of Hindustan Zinc is also scheduled to meet August 20, 2024, to consider and approve the second interim dividend on equity shares, if any, for the financial year 2024-25. 

Hindustan Zinc has a strong track record of paying hefty dividends to its shareholders. Last fiscal, the company paid ₹23 dividend for the full year, while it declared 42 dividends since June 28, 2001. In May this year, the company announced the interim dividend of ₹10 per equity share i.e. 500% on the face value of ₹2 apiece for the financial year 2024-25, amounting to ₹4,225.32 crore.

As per the latest shareholding data available on the exchanges, the government owned a 29.54% stake in HZL while Vedanta held 64.92% shares in the company. Anil Agarwal-led Vedanta has pledged nearly all its shareholding in HZL as collateral for loans taken by the company or the group.

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