In a notable development, Vedanta Ltd, under the leadership of Anil Agarwal, has received approval from its board to proceed with an Offer For Sale (OFS) of its 2.6% stake in Hindustan Zinc (HZL). The board’s decision authorizes the sale of up to 110 million equity shares of Hindustan Zinc, a move that is set to raise approximately ₹6,450 crore at the current share price of ₹586.00 on the NSE.
As of June 2024, Vedanta held a substantial 64.92% stake in Hindustan Zinc, with the central government holding a 29.54% share. The decision to divest this portion of its stake comes as a surprise, especially considering that Vedanta had recently been advocating for the central government to initiate an OFS for Hindustan Zinc.
This move is part of Vedanta’s broader strategy to manage its financial health. Recently, the company raised ₹8,500 crore through a Qualified Institutional Placement (QIP) to help reduce its debt and alleviate finance costs. As of June 2024, Vedanta’s net debt stood at ₹61,324 crore, with gross debt at ₹78,016 crore. Globally, Vedanta Resources reported a gross debt of $14.7 billion and a net debt of $12.5 billion by December 2023. The company has set a target to reduce its debt by $3 billion over the next three years.
Analysts from Nuvama have highlighted that Vedanta Resources faces imminent debt obligations of $1 billion for the remainder of FY25, which is expected to be met through dividends and brand fees. Additionally, $417 million in inter-corporate deposits are due by December. The proceeds from the Hindustan Zinc stake sale will significantly contribute to Vedanta’s debt reduction efforts and financial stability.
This strategic move by Vedanta reflects its ongoing efforts to streamline operations and enhance its financial position amidst a challenging economic environment.
