Hindustan Zinc OFS sees strong demand, with non-retail portion subscribed 1.42 times on day 1

Hindustan Zinc’s Offer for Sale (OFS) saw strong interest from institutional investors on the first day of the offering with 142.02% subscribed to the non-retail portion, reflecting healthy demand at the price levels offered.The OFS, launched by promoter Vedanta, opened for non-retail investors on Wednesday. The issue is being offered at a floor price of Rs 685 per share, at a discount to the recent market price of the stock.

The sale is part of Vedanta’s plan to divest a small portion of its stake in Hindustan Zinc while continuing to retain majority control in the company. The OFS is made up of two trading sessions, with the first day reserved for non-retail investors and the second day open to retail investors and non-retail bidders wishing to transfer unallocated bids.

Vedanta is selling an equity stake of up to 0.79% in Hindustan Zinc through the base offer, with an option to divest an additional 0.79% stake in case of oversubscription. Even after the sale, Vedanta will continue to hold a dominant stake in the zinc giant, underscoring that the transaction is primarily aimed at incremental share generation rather than a strategic exit.

The reaction was driven by the combination of a reduced price floor and Hindustan Zinc’s status as a cash-generating metals company. Hindustan Zinc is one of India’s largest mining companies and the world’s largest integrated zinc producer, also with a significant presence in lead and silver. Its size, cost-efficiency and track record of paying dividends have made it a stock of choice for long-term institutional investors.

The positive response to the OFS also came against the backdrop of a sharp move in both promoter and subsidiary shares. Vedanta shares closed over 3% higher at Rs 705.45, while Hindustan Zinc ended the session up 4.08% at Rs 727.20, well above the OFS floor price. The rally suggested that the market viewed the sale of the shares as value-adding and not as an overhang.

From a valuation perspective, Vedanta currently trades at a price-to-earnings ratio of around 22 times, with a price-to-earnings ratio of 1.19. The price-to-book ratio of almost five times indicates that the stock still commands a premium above its book value, which partly reflects investor expectations around the cash flows of subsidiaries like Hindustan Zinc. The OFS will continue on Thursday, when retail investors will have the opportunity to participate. Given strong institutional demand on Day 1 and the discount built into the price floor, market participants will be closely watching to see whether consumer interest reflects the enthusiasm shown by non-retail investors.