Government may delay HZL stake sale amid strong dividend inflows

n FY25 Hindustan Zinc achieved its highest-ever mined metal production

The government is reassessing the timing and mode of selling its remaining stake in Hindustan Zinc Ltd (HZL), as high and sustained dividend inflows make holding the company’s shares financially attractive, a senior official said.

HZL, one of India’s highest dividend-yielding listed companies, declared its first FY26 interim dividend of Rs 10 a share on June 11, reinforcing its position as a steady source of revenue for the exchequer. The Centre holds a 27.94 percent stake in the company.

“The government is getting good dividends from HZL. It is a good stock. So maybe the government will not offload it immediately if it is giving good dividends,” the senior official told Moneycontrol on condition of anonymity.

While the government could potentially get to Rs 40,000 crore by selling its residual stake at the current market price, it is now weighing whether the long-term cost in terms of lost dividends may outweigh immediate gains.

“This kind of thinking is there. If somebody is giving you a sustained dividend and if you sell it through OFS (Offer for Sale) or something, dividend loss will be there. You will have to see the cost-benefit. By selling the full government stake, the government may get Rs 40,000 now but in 15 years, how much will the government lose because it will not get that dividend,” the official added.

HZL has consistently ranked among the top dividend-paying firms. It paid a dividend of Rs 10 on May 15, 2024, and Rs 6 on December 14, 2023. With a dividend yield of 3.99 percent, HZL continues to provide strong returns to shareholders, including the government.

The Centre may at a later stage explore a staggered approach through a qualified institutional placement (QIP) or other tranches to offload its stake.

"The government can later consider selling the entire stake in one go via QIP, since it is a large chunk," the official said.

QIP refers to a method of raising capital by issuing shares directly to institutional investors, often used for chunk sales while avoiding market volatility.

This marks a shift from the earlier disinvestment approach that prioritised quick monetisation via OFS, with fiscal prudence and long-term revenue streams now influencing decision-making.

HZL's robust financial performance is a factor that can’t be ignored either. The company reported a net profit of Rs 3,003 crore in the fourth quarter of FY25, its highest-ever January–March earning, and a 47 percent increase from the year-ago period. Operational revenue also hit a record high for the quarter at Rs 9,087 crore, up over 20.

Its earnings before interest, taxes, depreciation, and amortisation surged 32 percent to Rs 4,816 crore and the EBITDA margin stood at a healthy 53 percent. Net profit margin improved to 33 percent from the year-ago period. HZL’s zinc, lead and silver segment contributed Rs 8,806 crore in revenue, rising over 21 percent.

In FY25, Hindustan Zinc achieved its highest-ever mined metal production at 1,095 kilo tonnes and refined metal production at 1,052 kilo tonnes. The company is the world’s largest integrated zinc producer.