Hindustan Zinc shares in focus as two-day Rs 5,900 crore OFS kick starts today

Shares of Vedanta Ltd subsidiary Hindustan Zinc Ltd are in focus on Wednesday morning after the central government announced its plan to sell up to 2.5 per cent stake in the integrated mining and resources producer of zinc, lead, silver and cadmium, through an offer for sale (OFS).

The floor price for the sale is set at Rs 505 per share, suggesting a discount of nearly 10 per cent to the prevailing market price. The OFS will open for non-retail investors today. Retail investors can bid on Thursday, November 7.

A total of approximately 5.28 crore shares will be on the block, which would be equivalent to 1.25 per cent of equity, with an additional option for oversubscription of 1.25 per cent equity. The government is looking to garner Rs 5,900 crore through the OFS.

Hindustan Zinc reported Q2 results that were largely in line with analyst estimates. The company continued to focus on improving production with tight cost control. Post HZL Q2 results, MOFSL retained its earnings estimates and expected the company to maintain its focus on profitability.

"We believe the current valuation prices in all positive factors. We maintain our Neutral rating on the stock with a target price of Rs 570, premised on 10 times EV/Ebitda on FY27 estimates," it said.

JM Financial maintained its positive stance on HZL, given its presence in the lower end of the global cost curve facilitated by high grade captive mines sufficient to meet requirements for decades, 100 per cent captive power plants, sizeable scale, diversified revenue stream with increasing contribution from silver sales. It suggested a target price of Rs 540 for the stock.

"We expect another dividend per share of Rs 11 in Q4FY25, taking FY25 DPS of Rs 40. Despite the high dividend, net debt is likely to rise to Rs 6,600 crore at FY25-end. The management is working to increase mined metal capacity to 2mtpa (from 1.2mtpa). The detail is likely by Q3FY25-end," Nuvama said. It suggested 'Reduce' and suggested a revised target price of Rs 350 from Rs 339 earlier.