Hindustan Zinc Sets Record Date for Special Dividend; Board to Meet Next Week for Approval

Hindustan Zinc Ltd (HZL), a subsidiary of Vedanta Limited, is gearing up to distribute a significant special dividend to its shareholders. The company has scheduled a board meeting on Tuesday, August 20, 2024, to consider and approve the second interim dividend for the financial year 2024-25. This move comes after the National Company Law Tribunal (NCLT) approved the transfer of Rs 10,383 crore from general reserves to retained earnings, enabling HZL to make this substantial payout. The record date for determining the eligibility of equity shareholders for the dividend has been fixed as Wednesday, August 28, 2024.

The special dividend payout, amounting to Rs 8,000 crore, is expected to significantly benefit the shareholders. Notably, around 30 percent of this special dividend, which translates to approximately Rs 2,400 crore, will go to the central government as non-tax revenues. This payout is in addition to the regular annual dividend of Rs 6,000 crore that HZL distributes, making it one of the highest dividend-paying companies in the Indian stock market. The announcement has been well-received by investors, reflecting positively on the company’s stock price.

The promoter Vedanta Limited, which holds a majority stake of 65 percent in Hindustan Zinc, stands to gain significantly from this special dividend. Vedanta is expected to receive about Rs 5,100 crore from the payout, which the company may use to reduce its debt. This strategic move comes at a time when Vedanta is also planning to sell up to a 3.31 percent stake in HZL through an offer for sale (OFS). The floor price for this OFS has been set at Rs 486 per share, representing a 15 percent discount to the last trading price, highlighting Vedanta’s intent to optimize its financial structure.

Despite the recent Supreme Court ruling on royalty, which has been negative for mining companies, the impact on Hindustan Zinc’s profitability is likely to be limited. The company’s robust financial health and efficient operations have enabled it to weather such regulatory challenges. In FY2023-24, HZL paid a total dividend of Rs 5,493 crore, with the government receiving Rs 1,622 crore for its 29.5 percent stake. The company’s strong cash flows and balanced capital expenditure have contributed to its ability to make such generous dividend payments.

Hindustan Zinc’s market performance has been noteworthy, with the share price settling at Rs 576 per share on the National Stock Exchange (NSE) on the day of the announcement. However, the stock saw a minor decrease of 0.69 percent in the trading session and a total decline of 6.91 percent in recent days. On Wednesday alone, 3.12 lakh shares of Hindustan Zinc were traded on the NSE, resulting in a total turnover of Rs 17.83 crore. The company is a constituent of the BSE 200 Index and boasts a market cap of Rs 2,42,089.65 crore, underscoring its significant presence in the market.

Hindustan Zinc’s PE ratio stands at 29.61x, reflecting investor confidence in the company’s growth prospects. Over 30 lakh shares were traded on the NSE on the day of the announcement, indicating strong market interest. The company’s consistent sales volume growth and efficient capital expenditure have been key drivers of its robust financial performance. HZL’s market capitalization more than doubled during the June quarter, reaching a high of Rs 3.4 lakh crore, attributed to its consistent cash flows and operational efficiency.

The company’s strong financial performance has enabled it to make such a generous dividend payment, enhancing value for its shareholders. This special dividend payment demonstrates Hindustan Zinc’s commitment to its shareholders and the community. The decision has been appreciated by the government and industry leaders, who see it as a positive contribution to the economy. This move could also set a precedent for other companies to prioritize shareholder value and distribute profits through special dividends.

In the backdrop of these developments, Vedanta’s plans to offload a larger stake in Hindustan Zinc at a discount have led to a drop in the company’s share prices. On Friday, Hindustan Zinc’s share price was down 5.08 percent at Rs 542.70 at the start of trade. Despite this, the company’s share price has increased by 84 percent this year, doubling its market capitalization in the June quarter. This highlights the potential for growth and profitability in the Indian market, despite short-term fluctuations in stock prices.

Hindustan Zinc’s performance is closely linked to India’s steel production growth, as it operates the world’s largest underground zinc-lead mine in India. The company’s highest ever annual refined zinc production in FY24, coupled with a 75 percent market share in the primary zinc market, underscores its dominant position. Despite reporting a debt of Rs 11,178 crore as of June 30, Hindustan Zinc’s strong operational performance and strategic financial management have positioned it well for future growth.

The special dividend payout is expected to have a positive impact on Hindustan Zinc’s operations and the Indian government’s non-tax revenues. The government’s stake in HZL is 29.5 percent, and it stands to gain significantly from this payout. The board of HZL is expected to meet on Tuesday to discuss and approve the special dividend, marking a significant milestone in the company’s financial strategy. This decision reflects Hindustan Zinc’s confidence in its future growth and profitability, further enhancing its reputation and credibility in the market.

Overall, Hindustan Zinc’s announcement of a special dividend payout of Rs 8,000 crore to its shareholders is a testament to its strong financial health and commitment to creating long-term value for its shareholders. The company’s robust cash flows, efficient operations, and strategic financial management have enabled it to make such a substantial payout. This move is expected to boost the company’s reputation and credibility in the market, setting a positive precedent for other companies to follow. Investors and industry leaders alike are optimistic about Hindustan Zinc’s future growth prospects, making it a compelling investment opportunity in the Indian market.

In conclusion, Hindustan Zinc’s special dividend payout is a significant development in the Indian corporate sector. The company’s strong financial performance, coupled with its commitment to shareholder value, has positioned it as a leader in the industry. The special dividend payout, along with the regular annual dividend, underscores Hindustan Zinc’s dedication to creating long-term value for its shareholders. As the company continues to grow and expand its operations, it is well-positioned to deliver sustained returns to its investors, making it a standout performer in the Indian stock market.