Here's What Sparked a 11% Rally in Hindustan Copper Shares Today

Public sector undertaking (PSU) stocks are on a roll.

For the last couple of days, every time I open the index quote page of BSE PSU index, it's trading at new 52-week high levels.

The index has outperformed benchmark indices BSE Sensex, NSE Nifty, and Bank Nifty over the past one year.

The sentiment for PSU stocks has turned bullish as a result of the overall market sentiment and due to the government's moves on disinvestment.

In the February 2021 budget, the centre had announced an ambitious disinvestment target to the tune of Rs 2.1 lakh crore. In the previous budget, this target was set at Rs 1.75 lakh crore.

The latest beneficiary of the disinvestment news is copper miner Hindustan Copper.

Hindustan Copper is one of the companies identified for divestment as part of the plan, including two PSU banks, and one insurance company.

Although the government is yet to announce a schedule for the stake sale, Vedanta's statement that it's looking to acquire the company was enough to send Hindustan Copper's shares soaring 11%.

Vedanta eyeing Hindustan Copper stake

Vedanta is looking to buy the government's stake in Hindustan Copper when the PSU is put up for privatisation.

Vedanta group's billionaire founder, Anil Agarwal, announced this on Monday, 4 October 2021.

The group is in the process of doing due diligence for the same.

When asked whether Vedanta is looking at participating in the government's disinvestment process, Agarwal said in an interview,

• Yes, we are looking at Hindustan Copper. We are doing the due diligence. The dates have not come. As soon as they announce the date, things will be much more exciting and people will start believing that the process is going on in India.

Following this news, Hindustan Copper shares surged over 11% today.

On a selling spree

Note that the centre has been reducing its stake in Hindustan Copper through the open market over the past couple of years to comply with shareholding norms and to achieve the budgetary target.

Just recently in September 2021, it sold 10% stake through an offer for sale (OFS) at Rs 116 per share.

An interesting data point is that Life Insurance Corporation (LIC) acquired the bulk of shares in this OFS, increasing its stake in Hindustan Copper to 14.98%.

After the OFS, the government now holds about 62% stake in Hindustan Copper.

In 2012, the government successfully offloaded about 5.58% of its stake in Hindustan Copper to garner Rs 8 bn.

Then in 2013, the government garnered nearly Rs 2.6 bn by selling 4.01% equity via OFS.

In 2017, the government collected Rs 4 bn by divesting 6.83% stake through an OFS.

Vedanta's US$20 bn investment plan

Not just Hindustan Copper, Vedanta is also looking to invest around US$20 bn in India during the privatisation of BPCL and Shipping Corporation.

For this, the group has floated a fund for US$10 bn. It received a great response from sovereign wealth funds.

The company says the investment will be done in the next 2 to 3 years. Vedanta will allocate 25% on the technology side and 75% on natural resources side.

Vedanta has a debt of around US$12 bn (including the parent company).

Anil Agarwal welcomed the recent privatisation move and said the government could get US$1 tn at the current market price.

Back in 2019, Anil Agarwal had urged PM Narendra Modi to divest a stake in at least five state-owned companies, which included Hindustan Copper.

In 2003, Vedanta had acquired the government's 64.9% stake in Hindustan Zinc.

How the stock markets reacted to Hindustan Copper's divestment news

Hindustan Copper share price opened the day up by 4% at Rs 125 on the BSE against its previous close of Rs 119.95.

As the session progressed, shares of the company rallied over 11% to touch an intraday high of Rs 133.70.

Hindustan Copper is the top gainer in the BSE PSU index, followed by IRCTC (up 7%), NLC India (up 5.7%), and GMDC (up 4.2%).

Hindustan Copper shares have a 52-week high quote of Rs 196.90 touched on 11 May 2021 when copper prices were on a roll.

Over the past one year, shares of the company have rallied 280%.

In fact, the company is placed at the second rank of top performing PSU stocks over the past one year.

However, it's still trading about one-third below its 52-week high of Rs 196.90.

About Hindustan Copper

Hindustan Copper is India's only vertically integrated copper producing company. It's involved in mining, beneficiation, smelting, refining, and casting of refined copper.

The company also produces gold silver, nickel sulphate, selenium, tellurium, and fertiliser as by products.

For more details about the company, have a look at Hindustan Copper's factsheet and Hindustan Copper's quarterly results on our website.

You can also compare Hindustan Copper with its peers.

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To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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