Hindustan Zinc share rises 3% on cabinet nod for stake sale

Shares of Hindustan Zinc extended their gaining streak for the second straight session and rose over 3% in opening trade on Thursday after the union cabinet approved the sale of the government’s entire stake in the mining and resource company. The mining stock has risen over 5% in two days and more than 8% in a week amid speculation about the government's stake sale plan.

In line with benchmark indices, Hindustan Zinc shares opened higher at ₹311 against the previous closing price of ₹305.05 on the BSE. In the first hour of trade, the large cap stock gained as much as 3.2% to hit a high of ₹315, while market capitalistion surged to ₹1.3 lakh crore. In comparison, the BSE Sensex was trading 185 points higher at 53,934 levels.

Hindustan Zinc shares got a boost after the Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved the sale of the government’s remaining 29.5% stake in the mining company. The transaction is expected to fetch the Centre ₹38,062 crore as per the company’s closing price on Wednesday. The company is yet to release details of the offer for sale (OFS) and price band for the offer.

The stake sale in Hindustan Zinc would help the government to meet its disinvestment target as the Centre had set a modest target of ₹65,000 crore from PSU disinvestment and strategic sale for the financial year 2022-23. The government recently raised ₹20,560 crore by offloading its 3.5% stake in the Life Insurance Corporation of India via the country’s biggest-ever initial public offering.

The Centre also mulls selling stake in Pawan Hans, Shipping Corporation of India, IDBI Bank, and Bharat Petroleum Corporation Ltd (BPCL) as part of its disinvestment plan.

Hindustan Zinc, a subsidiary of Vedanta, is one of the leading producers of zinc, lead, silver and cadmium. In April 2002, the government had sold 26% stake in the state-run company to Sterlite Opportunities and Ventures and transferred management control to Vedanta group. The Anil Agarwal-led nature resource company later acquired 20% in Hindustan Zinc through the open market transactions and an additional 18.92% from the government in November 2003, raising its shareholding in the company to 64.92%.

As per the latest shareholding pattern available on the BSE, Vedanta group holds 64.92% in Hindustan Zinc, while the government owns 29.58% shares. Among others, institutional investors hold 3.74% shares, while individual investors own 1.37% stake in the company.