Brokerages are concerned over the dividend bonanza from Hindustan Zinc (HZL), but the move has ramped up government earnings and cheered its shareholders. HZL has paid out a mammoth Rs 31,908 crore in four interim dividends, and the government with a 29.5 per cent stake in the company will scoop up Rs 9,422 crore as payouts for the year. So far, the government has mopped up Rs 31,100 crore by selling its shares in state-run firms against its target of Rs 50,000 crore for the financial year ending March 31. The Centre’s plan to sell its rump stake in HZL is on the backburner — one of the reasons the sell-off target has been missed — but the sum of nearly Rs 9,500 crore from the dividend payouts, will majorly breach the gap.
The sale of the Centre’s remaining 29.54 per ent government stake in Hindustan Zinc is likely only after a finality is reached on Vedanta’s planned sale of global zinc assets to the erstwhile PSU, according to an official. But analysts are concerned over the cash reserve position and HZL turning into a net debt company. On Tuesday, the board of HZL had declared the fourth interim dividend of Rs 26 per share amounting to Rs 10,985.83 crore. Since Vedanta Ltd holds 64.92 per cent of HZL, the payout will see it receiving around Rs 7,132 crore. In January the company had declared its third interim dividend of Rs 5,493 crore.
This followed a Rs 6,500 crore outgo in November 2022. In July that year, the company had declared the first interim dividend of Rs 8,873 crore. Therefore, the total dividend payout so far stands at nearly Rs 32,000 crore. However, as on December 31, 2022, the company’s consolidated gross investments and cash & cash equivalents were Rs 16,482 crore ompared with Rs 17,807 crore at the end of September 2022.
A CLSA note said that due to the fourth dividend, HZL will turn net debt from net cash. The brokerage has a sell rating on the stock. Analysts at Investec said that the company had paid out four interim dividends during the year and had utilised 90 per cent of its free reserves. “Any incremental payout is at mercy of internal accruals and contribution of general reserves to the retained earnings,” it said, setting a ‘sell’ tag on the stock with a target price of Rs 270. While Vedanta Ltd will receive nearly Rs 7,132 crore from the latest announcement, the expectation is that it will also announce an interim dividend which will in turn benefit its parent Vedanta Resources and enable the latter to trim debt.
The stock markets, however, cheered the dividend announcement and the HZL share ended 2.37 per cent or Rs 7.35 higher at Rs 317.80. “Hindustan Zinc looks weak from here. As we see after this dividend almost all cash reserves are out now from the company. If the commodities cycle turns around, then debt can increase. While on the other hand the government will also try to sell its stake because all cash is out,’’ Ravi Singhal, chief executive officer, GCL said.
HAL divestment
The Indian government is planning to sell up to a 3.5 percent stake in aerospace and defence company Hindustan Aeronautics Ltd this week in a deal that could fetch the government Rs 2,867 crore, an exchange filing showed on Wednesday. The floor price for the HAL stake sale is set at Rs 2,450apiece, at a discount of 6.7 percent to Wednesday’s close, according to Reuters The government owns a75.15 per cent stake in HAL.
