The shares of Hindustan Zinc jumped over 1.5 percent on July 11 as prices of silver continued to rally. The Vedanta Group-owned company's shares were trading at Rs 430 apiece in the early trading hours.
Silver's future contracts with September expiry opened at Rs 1.09 lakh per kg on the Multi Commodity Exchange (MCX). The prices then soared further to hit a lifetime high of over Rs Rs 1.11 lakh per kg.
In the domestic markets, the price of one kilogram of silver gained Rs 1,000 in a single day to hover near Rs 1.11 lakh, according to data on Good Returns.
Hindustan Zinc is the largest producer of silver in India, and produces refined silver with a minimum 99.9 percent purity. The sharp rise in the bullion's prices is expected to further boost the stock. Axis Securities remains bullish on silver prices, stating that the selloff in industrial metals was driving prices.
Vedanta management denies 'Ponzi scheme' claims:
The rise in the share price also comes after Vedanta Group denied 'Ponzi scheme' allegations levelled against it by American short-seller Viceroy Research. Vedanta Chairman Anil Agarwal told shareholders during its Annual General Meeting (AGM) on July 10 that the company has remained "extremely transparent". "[The report] appears to be a motivated report, but we will address it," he added.
He further outlined the company's growth prospects in the near future. "Our 3D strategy, Demerger, Diversification and Deleveraging will enable us to double in size and unlock maximum value for our stakeholders… This is not just a story of growth, it is the story of realizing India’s aspirations. We are fully aligned with the needs of a developed Bharat," he said.
Vedanta said that it has secured 10 critical mineral blocks across India, one of the largest by any private sector company. It is also setting up the world's first industrial Zinc Park and India's largest Aluminium Park, which is aimed at helping MSMEs and creating lakhs of employment opportunities.
The positive outlook from the company's management may have also boosted the stock.
Don't get distracted, says JPMorgan
JPMorgan meanwhile said investors shouldn’t get distracted by the allegations, and it remains overweight on Vedanta. For Hindustan Zinc, the international brokerage said that the Indian government continues to maintain an active presence on its board, Mint reported. It added that government oversight continues to be effective, especially concerning capex planning.
US-based short seller Viceroy Research on July 9 said that it has taken a short position on the debt of Vedanta Resources, saying that it resembles a 'Ponzi scheme'. It called the parent company of Vedanta a "parasite holding company with no significant operations of its own, propped up entirely by cash extracted from its dying host, Vedanta Limited".
The American short-seller had alleged that Hindustan Zinc's resources are being "looted" through related-party deals with promoter-family owned companies and unjustifiable brand fees. "Vedanta's crown jewel may be its biggest liability," it said while speaking about Hindustan Zinc.
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