Explained: Why Hindustan Zinc share price plunged 8% today

At 10:45 am, Hindustan Zinc shares were down 7.71% to Rs 516.30 on the Bombay Stock Exchange (BSE). 

In Short

• Hindustan Zinc falls nearly 8% in early trade
• Government divests 2.5% stake in Hindustan Zinc via OFS
• Hindustan Zinc down 40% from peak, still up 62% YTD

Shares of Hindustan Zinc Ltd., a subsidiary of Vedanta, plunged nearly 8% on Wednesday after the government announced plans to divest up to 2.5% of its stake through an offer for sale (OFS). At 10:45 am, Hindustan Zinc shares were down 7.71% to Rs 516.30 on the Bombay Stock Exchange (BSE).

The government currently holds a 29.5% stake in Hindustan Zinc, and this move marks another step in its ongoing divestment strategy.

The OFS will be conducted in two tranches: an initial 1.25% of the equity, with an option to sell an additional 1.25%. A floor price has been set at Rs 505, representing a 10% discount from Tuesday’s closing price, which triggered a drop in investor sentiment.

The sale, if fully subscribed, is expected to generate approximately Rs 5,300 crore for the government.

The OFS opened today for non-retail investors, with retail investors allowed to participate starting Thursday. Investors can place multiple bids during the day, with price discovery occurring throughout the trading session.

However, the final share allocation will be confirmed only at the end of the day, similar to the IPO allotment process. Should an investor’s bid be partially filled, the blocked amount for unallotted shares will be refunded.

It is worth mentioning that Hindustan Zinc shares are down 40% from its peak of Rs 807. However, on a year-to-date basis, the stock remains up by 62%, reflecting strong gains earlier in the year. In a year, the stock has gained over 74%.

It may be noted that the Vedanta Group, the company’s promoter, holds a 63.42% stake in Hindustan Zinc, and had previously divested a portion of its holding in August through an OFS.