The Cabinet Committee has approved stake sale in Hindustan Zinc (HZL) where government holds 29.5% stake sale.

The government is likely to raise over Rs 170 billion via stake sale in HZL. The news is positive for HZL stock. Also, the stake sale is positive for HZL's parent company Sesa Sterlite which holds 65% stake in HZL.

The stake sale in HZL will make HZL's cash fungible for its parent whose balance sheet is highly leveraged. Post the stake sale by government, Sesa Sterlite can use HZL's cash to repay some of its debt. However, we await further regulatory approvals.

Angel Broking maintains Neutral rating on Sesa Sterlite and Buy rating on HZL with a target price of Rs 154.

Shares of the company gained Rs 3.65, or 2.75%, to trade at Rs 136.20. The total volume of shares traded was 413,407 at the BSE (10.32 a.m., Tuesday).

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