The offer for sale (OFS) of commodity major Hindustan Zinc (HZL) garnered bids for only 63.6 million shares from institutional investors, less than half of the 133.7 million on offer. At the indicative price of Rs 495, the offering saw bids worth Rs 3,150 crore. Promoter Vedanta was aiming to raise over Rs 6,500 crore by divesting a 3.17 per cent stake.
Market experts said the sharp slide in shares of HZL in secondary market trading and the recent Supreme Court order allowing states to collect past tax dues from mining companies weighed on the demand for the share sale, although the impact of the SC order is not seen as significantly affecting HZL.
The base size of the OFS was 51.44 million shares, and the greenshoe option was set at 82.3 million shares. Vedanta can only partially execute the greenshoe option.
Another 13.4 million shares meant for retail investors will be auctioned on Monday. If the retail portion is fully subscribed, Vedanta will be able to mop up another Rs 650 crore.
The base price for the OFS is set at Rs 486. Shares of HZL fell 9.4 per cent to end at Rs 518 on the NSE, where almost Rs 600 crore worth of shares changed hands. The base price is 6.2 per cent below the last close. Typically, existing shareholders sell their shares in the secondary market and apply in the OFS to pocket the arbitrage gains.
Citibank and JM Financial are the investment banks handling the share sale.
At the end of June 2024, Vedanta held a 64.92 per cent stake, while the central government held 29.54 per cent in HZL. If the retail portion is fully subscribed, Vedanta’s stake in HZL will drop by 1.82 per cent. Hindustan Zinc, the country’s largest producer of zinc, is currently valued at Rs 2.2 trillion. Shares of Vedanta rose 2 per cent to Rs 429.
Anil Agarwal-led firm’s HZL stake divestment is part of the drive by Vedanta and its UK parent Vedanta Resources (VRL) to reduce its debt.
In June, Finsider International, a unit of VRL, sold a 2.6 per cent stake in domestically-listed Vedanta to mobilise Rs 4,184 crore, which was used to reduce its debt. At the end of June, Vedanta’s net debt was Rs 61,324 crore, and gross debt stood at Rs 78,016 crore. As of March 31, VRL’s debt levels stood at around $6 billion.
In July, Vedanta also raised Rs 8,500 crore (nearly $1 billion) in fresh capital by issuing 193.1 million new equity shares at an issue price of Rs 440 apiece through the qualified institutional placement route.
At the end of July, global rating agency S&P Global Ratings upgraded VRL’s rating to ‘B-‘ (a stable rating) from ‘CCC+’, citing an improving capital structure and liquidity.
“The stable outlook reflects our view that the company will proactively address the maturity of $1.2 billion of debt in April 2026,” the rating agency said in its research update.
First Published: Aug 16 2024 | 4:27 PM IST
