HZL shares drop, but long-term growth stays strong with ₹12,000 Cr expansion underway
On June 18, 2025, Vedanta Ltd made headlines by selling a 1.6% stake in Hindustan Zinc Ltd (HZL), raising ₹3,028 crore through a large block deal. This transaction is an important step in Vedanta’s larger financial strategy, especially as it prepares to restructure its business by splitting into several independent companies. The move has also affected Hindustan Zinc’s stock price and has sparked discussions in financial and business circles.
What Happened?
Vedanta sold about 66.7 million shares of Hindustan Zinc, reducing its total stake from around 63.4% to about 61.8%. The deal was done through a block sale on the stock exchange, which means a large quantity of shares was sold in one go to institutional investors, such as mutual funds, banks, and foreign investors.
The sale raised ₹3,028 crore, giving Vedanta a quick injection of cash. Soon after the announcement, Hindustan Zinc’s shares dropped by more than 6%, falling to around ₹444.35. The sudden price drop was due to market concerns about the stake sale and the increased supply of shares in the market.
Why Did Vedanta Sell the Stake?
The stake sale is mainly part of Vedanta’s effort to strengthen its financial position. The company has been working on reducing its debt and improving its balance sheet. Here are the key reasons behind the move:
Debt Reduction
Vedanta has been carrying a large debt for several years. By selling this small stake, it has received over ₹3,000 crore, which can be used to repay loans and reduce interest payments. Lower debt also improves the company’s credit ratings and financial health.
Preparing for Demerger
Vedanta is planning to split itself into multiple separate companies based on different businesses such as metals, oil and gas, and power. To carry out this demerger smoothly, it needs to clean up its balance sheet and improve its cash flow. Selling part of its stake in Hindustan Zinc helps with that goal.
Dividend Payment
Just before the stake sale, Hindustan Zinc announced an interim dividend of ₹7 per share, amounting to about ₹2,737 crore in total. This payout benefits Vedanta as a majority shareholder, giving it more liquidity to manage operations and investments.
How Did the Market React?
The market responded sharply to the stake sale. Shares of Hindustan Zinc fell by more than 6% in a single day, as investors worried about the sudden release of such a large number of shares into the market. This kind of move often leads to panic selling or technical breakdowns.
However, some experts believe this price drop is temporary. The fundamentals of Hindustan Zinc remain strong, and the company continues to be one of the largest zinc producers in the world. Over the long term, its strong cash flow, stable dividends, and expansion plans are expected to support its share price.
What’s Happening at Hindustan Zinc?
Hindustan Zinc is working on a major expansion project. It is investing nearly ₹12,000 crore to build a new integrated zinc complex in Debari, Rajasthan. This includes a large smelter and mining infrastructure that will increase production over the next few years.
The company has been performing well in terms of revenue and profit. It continues to declare regular dividends and maintains a healthy cash reserve. This strong financial position allows it to fund growth and return money to shareholders.
What Does This Mean for Vedanta?
For Vedanta, this stake sale is a positive development in the short term. The money raised will help it lower its debt and improve its financial flexibility. It also shows that the company is serious about restructuring and making progress toward splitting into separate companies.
Reducing its debt is important not only for better credit ratings but also to attract new investors. As Vedanta plans to list its new spin-off companies, a cleaner balance sheet will make those companies more appealing.
There may be concerns about the promoter reducing its stake, but a 1.6% sale is not large enough to raise serious doubts about control. As long as these sales are limited and well-timed, investors are unlikely to worry too much.
Key Impacts at a Glance
|
Area |
Immediate Effect |
Long-Term Effect |
|
Vedanta Ltd |
Gains ₹3,028 crore cash, lower debt |
Stronger financial health supports demerger |
|
Hindustan Zinc |
Share price dropped over 6% |
Long-term growth through ₹12,000 crore expansion |
|
Shareholders |
Some worry over stake dilution |
Strong dividend and growth outlook |
|
Market Sentiment |
Volatile short-term response |
Depends on zinc prices, expansion success |
What Happens Next?
Hindustan Zinc Share Performance
The stock may remain under pressure in the short term. However, if the company continues to show strong financial results and progress in its expansion, investor confidence is expected to return.
Vedanta’s Demerger Plan
The company is moving forward with its plan to split into several listed entities. More updates on this process are likely in the coming months. Each vertical will focus on a single business, improving transparency and performance tracking.
Further Stake Sales?
This is part of a broader effort, and more stakeholder sales could happen in the future if needed. Market response to any future sales will depend on timing, scale, and the overall financial situation.
Focus on the Zinc Market and Global Demand
Zinc prices in the international market and raw material costs will also affect the performance of Hindustan Zinc. If demand remains strong and commodity prices are stable, it could support the company’s profits and stock recovery.
Vedanta’s sale of a 1.6% stake in Hindustan Zinc for ₹3,028 crore is a strategic move aimed at reducing debt and supporting the company’s upcoming demerger. While the immediate market response was negative, the long-term benefits could be significant for both Vedanta and Hindustan Zinc.
For Vedanta, the cash inflow strengthens its position ahead of a major structural change. For Hindustan Zinc, the core business remains strong with large-scale investment in expansion. As global demand for zinc and other metals grows, both companies are expected to remain key players in India’s mining and metals industry.
The next few months will be crucial as investors watch for progress in Vedanta’s restructuring and signs of recovery in Hindustan Zinc’s share price.
