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Hindustan Zinc Ltd announced a total $1 billion as interim dividend to its shareholders, the firm said in a notice to exchanges.

The firm said its board approved a dividend of 18 a share -- implying a dividend yield of 5.09% to its closing price as on 7 December. It fixed the record date for the dividend as 15 December.

Its parent Vedanta Ltd which holds 64.92% stake is expected to get nearly 4937.68 crore of the total interim dividend of 7605.57 crore or $1 billion, but it's not clear if the same will be passed through to Vedanta's shareholders. The government who owns 30% stake in Hindustan Zinc will get 2667.89 crore out of total.

As of FY21, Vedanta has total consolidated debt of Rs57026 crore while Hindustan Zinc's total standalone debt was at 7177 crore.

Last month, the Supreme Court allowed the government to divest the remaining shareholding of 29.5% in Hindustan Zinc. At current market price, the government's residual stake in Hindustan Zinc is worth around 52387.11 crore.

Analysts expect the Hindustan Zinc stock to remain under pressure going forward given the overhang of a large stake sale as the government eventually looks to monetize its stake and the likely reduction of premium to industry as liquidity increases and government presence on the board post any stake sale goes away.

"The company’s valuations (7.6x FY23 consensus EV/EBITDA) are at a sharp premium to Indian metal and mining companies which reflects the illiquidity premium and a premium for government presence on the Board, and we see the risk of valuation premium to peers reducing going forward as liquidity increases and government presence on the Board likely goes away post-stake sale", said JP Morgan in a 18 November note to its investors

"Given that it is going to be a market sale, we struggle to see such a large stake being sold at one go, and most likely the government will sell at periodic intervals", JP Morgan note added.

On Tuesday, Hindustan Zinc stock ended at 353.45 on BSE, up 1.33% from its previous close while Vedanta gained 2.53% to 344.25 a share.

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