Can Hidden Blade be used when we are distributing the damage on the battlefield?

No — Hidden Blade cannot be used while combat damage is being assigned/distributed on the battlefield.

Here's why: Once the Showdown closes (both players pass Focus), you enter the Combat Damage Step. The game skips FEPR during this step (Rule 460.3), meaning there is no priority window to play any spells — including Hidden Blade — while damage is being assigned or dealt. Hidden Blade must be played during the Showdown while you have Focus and the Chain is open.

If you want to use Hidden Blade to kill a unit before it deals or receives combat damage, play it during the Showdown (before both players pass). Once the damage assignment process begins, it's too late to intervene.