Hindustan Zinc to Consider Second Interim Dividend

Hindustan Zinc Ltd., a key player in the Indian mining industry, has informed the stock exchanges that its board will meet on August 20 to consider a second interim dividend for the current fiscal year. This announcement has garnered significant attention, particularly due to the company’s historical dividend payouts and its strategic importance to major stakeholders like Vedanta Ltd.

Background: A History of Generous Dividends

Earlier this year, in May, Hindustan Zinc declared its first interim dividend of ₹10 per share. Given that Vedanta Ltd., led by Anil Agarwal, holds a 64.92% stake in Hindustan Zinc, this payout translated to a substantial Rs 2,743 crore for Vedanta. This was in line with Hindustan Zinc’s reputation for rewarding its shareholders handsomely. In the financial year 2023, the company set a record with a dividend payout totaling nearly Rs 32,000 crore. This trend continued in FY24 with a payout of Rs 5,493 crore.

The Current Scenario: Clarifications and Market Speculations

This week, Hindustan Zinc found itself in the spotlight after a report suggested the possibility of an impending dividend announcement. The company swiftly issued a clarification, stating that no such proposal was currently under consideration. This statement momentarily quelled market speculation, but the recent notification regarding the August 20 board meeting has reignited interest among investors and analysts.

Shareholding Pattern: A Stock with Low Free Float

Hindustan Zinc is characterized by its low free float in the market, making it a unique entity in the Indian stock market. Vedanta’s significant stake of 64.92% is complemented by the Government of India’s 29.54% shareholding, Life Insurance Corporation of India’s (LIC) 2.76%, and a minuscule 0.06% held by mutual funds. Small shareholders, defined as those with an authorized share capital of less than Rs 2 lakh, own just 1.51% of the company. Despite these low figures, there are approximately 4.33 lakh small shareholders as of the June quarter.

Upcoming Offer for Sale: Potential Increase in Free Float

In a related development, Vedanta, the promoter of Hindustan Zinc, announced on Tuesday that it plans to offload up to 11 crore shares of its subsidiary through an Offer for Sale (OFS). Although the specifics of the OFS have not yet been disclosed, if Vedanta successfully sells its 2.6% stake, it would result in a doubling of Hindustan Zinc’s free float from the current 2.6%. This move could significantly impact the liquidity and trading dynamics of Hindustan Zinc shares in the market.

Stock Performance

The market has responded to these developments with a mix of caution and optimism. Shares of Hindustan Zinc, which have seen a robust 81% gain in 2024, were trading 0.69% lower at Rs 576 after recovering from the day’s lows. Despite this correction, the stock remains significantly below its record high levels of Rs 807.7, indicating a near 30% drop from its peak.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.