Vedanta group firm Hindustan Zinc Ltd (HZL) plans to dole out a special dividend payout of ₹8,000 crore to its shareholders in the current fiscal, according to sources.
HZL’s board is likely to meet on Tuesday to consider and approve the special dividend payment for this fiscal, they said.
“Of this, around 30 per cent or ₹2,400 crore may go to the Centre contributing to its non-tax revenues for the fiscal,” sources in the know of the development said.
The move follows the National Company Law Tribunal’s (NCLT) approval to transfer ₹10,383 crore of general reserves to its retained earnings.
This special dividend will be over and above the regular dividend of around ₹6,000 crore, which HZL doles out every year.
Apart from the government, this will also benefit promoter Vedanta Ltd, which holds around 65 per cent stake in HZL, and will receive around ₹5,100 crore, which it may use to further de-leverage its balance sheet.
Vedanta will also be selling up to a 3.31 per cent stake in HZL through the offer for sale issue from August 16 to 19. It has set the floor price at ₹486 per share.
HZL has benefited from steady growth in sales volume and balanced capital expenditure for continuing operations, creating a strong track record of generating cash flows.
The company said in its scheme of arrangement filed with the NCLT that it expects the growth trajectory to continue and its business operations will keep generating incremental cash flow over the coming years.
In the last financial year ended March 2024, Hindustan Zinc had paid a total dividend of ₹5,493 crore, of which the government received ₹1,622 crore against its 29.5 per cent stake in the company.
In FY22-23, the company made a record dividend payout of around ₹32,000 crore, with the government getting a whopping ₹9,500 crore.
During the June quarter, Hindustan Zinc’s market capitalisation more than doubled as it added almost ₹1.6 lakh crore. In fact, the company touched its highest-ever market cap of ₹3.4 lakh crore during the quarter.
Vedanta Ltd’s planned sale of its 3.31 per cent stake in subsidiary Hindustan Zinc Ltd (HZL) will boost funds available with the mining conglomerate for debt repayment and capital spending, CreditSights said on Thursday.
Vedanta Ltd board of directors on Tuesday approved the sale of up to 2.6 per cent (11 crore shares) in its zinc subsidiary, worth ₹6,370 crore.
On Wednesday, it raised the quantum to 3.31 per cent, which at last trading price could fetch over ₹8,000 crore.
The sale through the offer-for-sale route to retail and institutional investors will bring down Vedanta’s stake in HZL from 64.92 per cent to 61.61 per cent.
“We view HZL’s stake sale as credit positive for Vedanta Ltd and (its parent) Vedanta Resources Ltd’s creditors and bondholders, given more funds will be available for debt repayment and/or capex spending; further debt reduction will lower VRL’s already-elevated interest burden,” CreditSights said in a note.
At the same time, the stake sale will reduce Vedanta’s future dividends received from HZL, which has been the group’s cash cow for many years.
“While we believe that the worst is over for Vedanta Resources Ltd (VRL) and its successful bond restructuring has meaningfully eased near-term debt refinancing risk, we expect VRL’s debt funding access to remain constrained and its interest burden to remain elevated.
“We anticipate upside risks to capex guidance of $1.9 billion, even as we see an improving FY25 (April 2024 to March 2025 fiscal year) credit outlook for Vedanta Ltd/VRL on the back of rising commodity prices, higher volume guidance and lower production costs,” it said.
