Shares of Hindustan Zinc fell on Friday on reports that the company’s parent company, Vedanta GmbHis looking to offload a major portion of its stake in the company through an offer for sale (OFS) at a discount. Hindustan Zinc is also reportedly planning to announce a large special dividend to its shareholders.

What happened: Anil AgarwalCompany-owned Vedanta has announced plans to sell up to 3.31% stake in Hindustan Zinc through an offer for sale (OFS) scheduled from August 16 to 19 — this is more than the previously announced sale of 2.6% stake. The floor price for the OFS has been fixed at ₹486 per share, a discount of 15% to the last trading price.

Hindustan Zinc has shown strong performance, recording its highest-ever annual refined zinc production in fiscal 2024 and maintaining a 75% market share in the primary zinc market. The company operates the world’s largest underground zinc-lead mine in India and has linked zinc demand to the growth of Indian steel production.

Despite the stock’s strong performance year-to-date, the company reported debt of Rs 11,178 crore as of June 30, adding to Vedanta Group’s consolidated debt of Rs 78,016 crore.

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Big Payout: Hindustan Zinc, a subsidiary of Vedanta Group, plans to declare a special dividend of Rs 8,000 crore to its shareholders for the current financial year, PTI reported, citing sources. The company’s board of directors is scheduled to meet on August 20 to finalise the approval of this special dividend.

This special dividend comes after the National Company Law Tribunal (NCLT) recently approved the transfer of Rs 10,383 crore from Hindustan Zinc’s general reserves to retained earnings. The special dividend will be paid in addition to the company’s regular annual dividend of around Rs 6,000 crore.

About 30% of the special dividend, or around Rs 2,400 crore, will be allocated to the Indian government, contributing to its tax-free income for the financial year, the news agency reported. The government holds a 29.5% stake in Hindustan Zinc and will receive this distribution alongside other shareholders.

Promoter Vedanta Ltd, which owns around 65% of Hindustan Zinc, is expected to gain around Rs 5,100 crore from the special dividend. Vedanta is expected to use this amount to further reduce its balance sheet debt.

Price promotion: Hindustan Zinc’s share price fell 5.08% to ₹542.70 just before the start of trading on Friday. Hindustan Zinc shares have risen 84% this year, virtually doubling the company’s market capitalization in the June quarter.

Meanwhile, Vedanta’s share price rose 1.09% to ₹424.80 in early trade on Friday.

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