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Company Profile

Hindustan Zinc Ltd., India’s largest integrated zinc producer, prioritizes safety and resource conservation. With over 50 years of experience, it holds a 75% market share in India’s primary zinc industry and is the 3rd largest silver producer globally. Vedanta Limited owns a 64.9% stake, while the Indian government holds 29.5% in the company. Hindustan Zinc operates lead-zinc mines, hydrometallurgical zinc smelters, lead smelters, pyro metallurgical lead-zinc smelters, and captive power plants in northwest India, with a total metal production capacity of 1.123 mt. Facilities are located at various districts of Rajasthan and Uttarakhand.

Metal Industry in India

•    Zinc, a widely used metal, was first produced in India in 1966. Secondary zinc production, a recycling process, has recently started in India, primarily from scraps, drosses, and fluxes. Recovery units with capacities of 1 to 15 tonnes are importing basic raw material from abroad.

•    India’s zinc industry, quite a good years old, is in good shape with excellent absorption of imported technology, intensive training, and indigenization efforts. It needs expansion for growth.

•   India’s strategic location and production advantage in steel and alumina make it an attractive export destination, with 1,319 reporting mines in FY22. India’s vast resources in metallic and non-metallic minerals, including bauxite, chromite, iron ore, and lignite, serve as a foundation for the country’s mining industry. This industry can significantly impact GDP growth, foreign exchange earnings, and provide a competitive edge for industries like building, infrastructure, automotive, and electricity.

•    India’s mineral production / capacity has increased considerably, driven by innovative exploration and strategic mineral sourcing from countries like Australia, Argentina, and Chile. Indian state-run companies like National Aluminium Co Ltd, Hindustan Copper Ltd, and Mineral Exploration Corp, have formed a joint ventures to acquire overseas mining assets containing lithium and cobalt minerals.

•    The Union Cabinet approved an amendment in February 2024 to the Mines and Minerals Act, 1957, specifying royalty rates for 12 critical minerals. New mining capacities in iron ore, bauxite, and coal are expected, with potential for sub-surface deposits. Infrastructure projects offer lucrative business opportunities for steel, zinc, and aluminium producers.

•   The Indian government’s National Mineral Policy, approved in 2019, has improved regulation, transparency, social and economic growth, and sustainable mining techniques, granted industry status and boosted private sector funding. The plan aims to boost mining industry expansion and GDP growth contribution post-covid by facilitating mergers, involving private sector, and transferring mineral corridors for metals and leases.

Company Perspective and Review

•     Hindustan Zinc Ltd appears to be in a transitional phase, marked by substantial strategic financial decisions such as high shareholder returns, increased leverage, and asset reallocation. The overall financial health indicates a need for careful monitoring of liquidity and leverage to ensure sustainable operations and growth. The consistent investment in tangible assets suggests a focus on maintaining operational capacity, while fluctuations in current liabilities and assets highlight dynamic financial management strategies.

•    The company also shows a solid performance with peak profitability in March 2023, driven by high revenue and efficient cost management. The subsequent decline in March 2024 highlights the impact of increased finance costs and a drop in revenue. The overall trend points to a company that has managed to maintain profitability despite market fluctuations and increased borrowing, but with a need to address rising costs and stabilize revenue streams for sustained growth.