Hindustan Zinc (HZL), in which mining major Vedanta (VEDL) holds a majority stake, has announced an interim dividend of Rs 7 per share for FY24 that entails a total outgo of Rs 2,957.72 crore.
Following the issuance of the dividend, VEDL will get Rs 1,920 crore in dividends in lieu of the 64.92% it holds in HZL.
The company has fixed July 15, 2023 as the record date for the payment of the interim dividend, HZL said in a stock exchange update on Saturday.
This is the first dividend payout by HZL for FY24, and is also the lowest interim dividend in the last three years.
HZL had declared a total dividend of Rs 75.5 per share in the previous financial year, with a total outgo of Rs 31,901 crore.
The Indian government holds a 29.54% stake in VEDL, which was privatised more than two decades ago, and the remaining by public shareholders.
As of date, HZL has cash and cash equivalents to the tune of Rs 10,061 crore and total borrowings of Rs 11,841 crore.
The issuance of the dividend comes at a time when VEDL’s parent, London-headquartered Vedanta Resources (VRL) was seeking to shore up funds to trim debt.
As of May 25, 2023, VEDL had pledged almost 95% of its holdings in HZL to raise funds, an increase from 87.59% shares pledged as of March 31, 2023.
As of March, VRL’s stake in VEDL stood at 68.11%, which fell to 65.18% as of May, according to BSE data.
In May, VEDL approved its first interim dividend of Rs 18.50 per share for FY24 with a total payout of Rs 6,877 crore.
VEDL had announced a total dividend payout of Rs 37,700 crore through five issuances in FY23 alone.
According to a report by CreditSights in June, VRL was expected to “successfully” service its debt maturities in the next 12 months.
However, the research firm had said it was “watchful” of the refinancing risks for $4.2-billion term debts due in FY24, cautioned of execution risks and inability to tie up funds for late-FY24 would pose downside risks.
The various funding channels include stake pledging, dividend upstreaming, domestic bond private placement of up to Rs 2,100 crore ($255 million) that was recently approved.
VRL has $1.7 billion of short-term investments in various bank deposits, quoted bonds and mutual funds as of March 2023, which analysts at CreditSights believe, could be liquidated if “need arises”.
In June, VRL said in a regulatory update that its gross debt fell by 20.40% to $7.8 billion from $9.8 billion in 12 months to March 2023.
It fell further to $6.4 billion as of May 2023 due to continued deleveraging and “significant” improvement in balance sheet position.
The company has generated Ebitda of $4.6 billion in FY23, the second-highest level, and free cash flow pre-capex of $2.8 billion (an all-time high), it said.